Economists See Little Effect From Drought

Rising commodity prices, propelled by a Midwestern drought, may drive up meat prices next year but probably will not trigger sharp increases in supermarket prices or inflation, experts said Tuesday.

“The drought will not affect 1988 food prices,” said Ralph Parlett, food economist for the Agriculture Department.

“Food prices next year might increase at a somewhat faster pace than they did this year, but even at that I don’t expect a galloping inflation or double-digit inflation,” he said.

Spurred on by increasingly dry conditions in the major growing areas of the central United States and fears of significant crop problems this summer, crop prices have jumped to levels not seen in the Farm Belt for some time.

At the Chicago Board of Trade, the world’s biggest center for agricultural futures trading where traders bet on the price direction of crops, soybeans are trading at levels more than 60% higher than a year ago. Wheat is selling at prices almost 50% above year-ago prices, and corn is commanding prices 40% higher than last year.

The sharp increase in crop prices has prompted fears that the higher prices will lead to higher food prices that could fuel the fires of inflation.

Big Increase Unlikely

But economists and food industry sources generally discounted the theories that high food prices would lead to inflation. And they said it is even unlikely, with the exception of a few items like meat, that food prices will increase significantly because of the dry weather.