‘Plenty to Get Us Through,’ Expert Tells Congress : Hefty Grain Stores Ease Drought Effects

WASHINGTON — A top government farm economist predicted Wednesday that the nation’s hefty stockpiles of corn, wheat and other grains should minimize the effect of the searing drought on food supplies and prices this year.

Assistant Agriculture Secretary Ewen W. Wilson assured lawmakers and consumers during congressional testimony that, while rain may not be falling much over the nation’s heartland, the sky is not falling either.

“We have plenty of grain in stocks to get us through to the next harvest no matter what the size of that harvest is,” Wilson told a House Agriculture subcommittee. “ . . . Consumers should not see skyrocketing prices.”

Speaking later to a House Banking Committee panel, Wilson, who heads the agency’s economics section, said the drought was expected to add only 1% to overall retail food costs in 1988, although the price for a few popular items such as pasta and oat-based cereals might shoot up more dramatically.

Other Projections

That projection appeared to be in line with those of other government and private analysts who have cautioned against panicked reactions to now-familiar scenes of scorched crops across much of the nation.

“You can keep eating Cheerios, corn flakes and Shredded Wheat to your hearts content,” said Don Seaborg, an economist with the Commodity Economics Research Service of the Agriculture Department.

There is little doubt the dry spell could prove devastating to both farmers and consumers should it linger into next year, but balancing factors built in to the complex agricultural marketplace have so far served to mitigate the damage. They could produce future headaches themselves, however.

For example, commodities speculators have sent feed grain costs soaring in the wake of the drought, leading dairy and pork farmers to send much of their herds to slaughter. That should result in a glut of lower-priced meat in markets and ease demand for feed grains. Eventually, however, the glut of beef and pork could run out, turn into a shortage, and push meat prices higher again.

Huge Stores

Analysts point to huge stores of two major cash crops, corn and wheat, as the key so far to holding the economic impact of the drought to manageable levels. In recent years, bumper crops have bloated government and private stockpiles. According to government statistics, as of June 1, there were more than 1.2 billion bushels of wheat and 5.8 billion bushels of corn on hand--enough to meet domestic and export demand for six months.

In theory, such stockpiles can prove important weapons in government efforts to fight wide fluctuations in commodity prices, helping to manage supply and demand and keeping American goods competitive on world markets.

In times of overproduction, government purchases of commodities can prop up declining prices and help some fiscally shaky farmers stay afloat. When production falters, the stockpiles serve as insurance to guard against serious food shortages--a kind of “rainy day fund” for when it fails to rain.

“One of the things that government people always have in the back of their minds when they have these reserves is that you can not predict when you’re going to have a kind of situation like a drought or a widespread disaster,” explained Larry Rus, a spokesman for the St. Louis-based National Corngrowers Assn.

Back in the 1930s, federal farm officials began the practice of buying up crop surpluses to sop up excess supply. At first, government grain was stored in government warehouses. But in the 1970s, Washington gradually got out of the business of warehousing its grain. Unlike the strategic reserves of federal oil, which are held underground in Louisiana salt domes, government grain stocks these days are scattered in thousands of warehouses, grain elevators, silos and bins throughout the country. Much of the stockpile stays right on the farm, with the government buying grain from a grower and then paying him to store it on his property. Commercial grain elevators are also used for the same purpose.

Updated Projections

Wilson said Wednesday that it was still too early to assess total crop loss or damage due to the drought. He said agriculture officials would update projections for the 1988 crop next week and refine the numbers again next month as harvest time approaches. But, in the case of corn and wheat at least, analysts said the stockpiles should prove sufficient to help the nation weather even the poorest harvest.

In 1934, the worst drought year prior to this one, corn farmers still managed to produce 50% of the crop they had planted, Rus said. A 50% level this summer would produce about 3.5 million bushels of corn, he said, enough to more than meet demand when added to stocks already on hand.

“I don’t see any danger of us running out,” he said.

For a few key crops, however, the situation is bleaker. Soybeans and oats are not in plentiful supplies and continued dry weather could force exports of those commodities to be curtailed, Wilson said. However, he said, dramatic price increases for those products could be held in check by plentiful supplies in other parts of the world.

Supplies of winter wheat, the country’s main wheat crop and the variety used for bakery products, are plentiful, Wilson said. However, he said the drought had seriously damaged the wheat variety known as durum, which is grown in the summer months and used largely in the production of pasta.

Also contributing to this story were researchers Ruth Lopez and Rhonda Bergman in Chicago