Expats certain to feel the impact of drought in U.S.

Expats in Costa Rica may not feel the effects of the U.S. drought for months, but food prices here are bound to rise.

Maize traded above $8 a bushel (per 25 kilograms) in futures trading Thursday. That breaks a record set last July. It is about four times the average maize price through most of the 2000s.

Soybeans used to trade at around $5 a bushel, says Purdue University economist Chris Hurt. “Now we’re trading at over $17,” he said. “So again, tripling a base price just a few years ago.”

The soaring price of grain quickly translates into higher meat prices.

U.S. exports of agricultural products to Costa Rica totaled $512 million in 2010, according to the Office of the U.S. Trade Representative. Leading categories include: coarse grains ($117 million), soybeans ($98 million), wheat ($62 million), and rice ($33 million).

Not all categories of foods are being affected by the U.S. drought. To some extent higher U.S. prices might be beneficial to Costa Rican farmers. Pork producers have been complaining about U.S. imports driving them out of business. Higher U.S. pork prices should give the local formers an edge and maybe even increase exports.

Groceries that cater to expats import plenty of U.S. foods, from Johnsonville sausages, to oils, to brand name pasta products to Coors beer.

Costa Rica’s exports to the United States also probably will take a hit. As shoppers there pay more for meat and grains, they have less to spend for coffee, pineapples and bananas, the main Costa Rican exports. U.S. imports of these three products
totaled slightly more than half a billion dollars in 2010, said the U.S. Trade Representative.

Hurt, the economist, says the U.S. drought hits at a time when supplies are already extremely tight. About a quarter of the U.S. maize crop is made into ethanol fuel, and China’s growing appetite for livestock feed is gobbling up soybeans.

Higher prices will help farmers who have a crop to sell. But with three-quarters of the crop in drought-hit areas, many farmers will be taking losses. And Hurt notes that crop farmers will not be the only ones who suffer.

“The animal sector is also going to have major financial losses,” said Hurt. “They have much higher feed costs. And in the short run they can’t pass that on to consumers.”

Hurt says there may even be bankruptcies in the U.S. livestock industry.

Since American farmers are the largest suppliers of food commodities to the world, Hurt sees a global impact.

“So, this shortage in the United States is clearly going to cause concerns and problems in the rest of the world,” he said.

He says the drought will push up prices for bread, cereal and other grain-based foods first. “The people that hurts the very most always in these situations is the lowest-income people in the world, those who are already in dire poverty.”

Costa Rican expats have an advantage in the local vegetable products. The weekly ferias respond to local economic pressures, not the price of maize.
So by avoiding imports and perhaps putting more local vegetable products in the diet expats can help stay within their budget.

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