The upsides of bad weather are...

(1) that grain farmers get rich;

and

(2) the topic of my personal interest gets major billing at the New York Times:

Rising Corn Prices Bring Fears of an Upswing in Food Costs:

First it was heat and drought in Russia. Then it was heat and too much rain in parts of the American Corn Belt. Extreme weather this year has sent grain prices soaring, jolting commodities markets and setting off fears of tight supplies that could eventually hit consumers’ wallets.

In the latest market lurch, corn prices dropped in early October, then soared anew, in response to changing assessments by the federal government of grain supplies and coming harvests.

The sudden movements in commodities markets are expected to have little immediate effect on the prices of corn flakes and bread in the grocery store, although American consumers are likely to see some modest price increases for meat, poultry and dairy products.

But experts warn that the impact could be much greater if next year’s harvest disappoints and if 2011 grain harvests in the Southern Hemisphere also fall short of the current robust expectations.


“We can live with high commodity prices for a period without seeing much impact at the retail level, but if that persists for several months or a couple of years, then it eventually has to get passed on” to consumers, said Darrel Good, an emeritus professor of agricultural economics at the University of Illinois.

....

Uhm, with all due respect to Dr Good (whoes work I generally admire) this is kind of silly, as the article (much later) points out:

That is because the cost of basic grains makes up only a small fraction of the total cost of most manufactured foods that contain them, such as breakfast cereals or bread. A large part of the cost of those items comes from transportation, processing and marketing.

Perhaps that is a quote taken out of context by a reporter trying to make a splash up front.  But since it is The Times, after all, they have to get honest further down in the column, where fewer readers venture (I'm feeling Brad Delong's theme here: Why oh why can't we have a better press corps?)

The big deal here is what happens to food prices in very poor countries, not the US or other relatively developed nations.  Sadly, that's not mentioned in this article.  Oh well.

The back story here is that: (1) for the last 15 years the weather has been strangely good in the Midwestern corn belt, which is, by far, the most important region in the world for basic grain production and (2) climate change forecasts indicate that strangely good weather will turn into catastrophically bad weather very soon.

I hope that doesn't happen.  But if it does happen, and if we cannot adapt really, really fast, then consider:  If a temporary downward production shock of 4.6%, buffered by ample inventories, causes grain prices to increase this much, what will a permanent downward production shock of 80% percent do?

Don't worry: your kids will eat just fine.  The price of Big Mac will hardly change, even if corn prices triple or more.  But it's not your kids I'm worried about.

And I'm not saying this will happen.  But I do think the risk is very real.