Flooding of Southern Farms Poised to Wreak Havoc on Economy

Farm lands north of Yazoo City, Miss., begin to go under water May 9. (AP)

The historic flooding in the South is poised to wreak havoc on the economy at multiple levels, likely putting local farmhands out of work while contributing to the nationwide rise in food prices.

As the Mississippi River crests and the flooding spreads to Mississippi and Louisiana, the vital grain crops in the region are in peril. In some places, the floodwaters are swamping or bearing down on wheat that is almost ready for harvest and corn that has broken through the ground, as well as plantings of rice, soybeans and cotton.

While people wait to return to their homes, they face the prospect of an economic calamity in the near-term. The impact will ultimately depend on how far and deep the flooding spreads, but state farming communities already are warning that it will take a big toll.

The Arkansas Farm Bureau on Tuesday estimated the flooding had submerged 1 million acres of state cropland, costing more than $500 million. The bureau suggested the hit to the state economy would be greater, predicting farmers wouldn't be able to start recovering at least until the beginning of June. Arkansas, the largest rice producer in the country, probably lost 300,000 acres of rice in the floods, according to the organization.

Andy Prosser, spokesman with the Mississippi Department of Agriculture and Commerce, told FoxNews.com the flooding will have a "tremendous effect" on local farmers and economies. Farmers in his state were preparing to harvest winter wheat, and most had already planted their corn, he said.

"If water goes over the top of corn, most likely it will be destroyed," Prosser said.

Farmers in the region may have an opportunity to recover some of their losses with other crops, like soybeans, but they could expose those crops to greater risk if they plant them too late.

If farmers lose their wheat and corn and then miss the ideal window for soybeans, Prosser described it as a "total loss," one that would be felt locally.

"It does take a direct hit at the farm level if employees cannot get to the fields," he said. "That translates into their local economies."

Parr Rosson, a professor at Texas A&M University and president-elect of the Southern Agricultural Economics Association, disputed the notion that the flooding would necessarily hurt the local job market.

He said there will be a "disruption" in the short term, but it could be offset by the surge in activity from farmers trying to rebuild and replant what they can when the waters recede.

"I don't think it's a net loss," he said.

However, Rosson and other economists predicted the impact would be felt in food prices, with production threatened across hundreds of thousands of acres.

Food prices have already been on the rise as the U.S. struggles to keep up with a rapidly rising global demand for its crops. The U.S. is the world's top producer of soybeans and maize, but a series of natural disasters and unusual weather patterns have held back the yields.

The U.S. Department of Agriculture plans to release its latest forecast Wednesday on food prices and crop supplies, and the trend lines are not promising.

Though the USDA earlier in the year predicted an increase in planting for key crops in 2011, weather conditions have held back farming in the South and beyond. While Southern states face the prospect of total flooding, heavy spring rains in the northern Midwest have delayed planting in that region. That's on top of droughts and extra-cold weather in some states over the winter.

"There's a lot of unknowns at this point that create uncertainty which leads to more volatility in terms of prices," Rosson said. "This just adds more uncertainty to the process."

The USDA estimated last month that overall food inflation for the year will fall between 3 and 4 percent -- and as high as 4.5 percent for groceries. That follows two consecutive, recession-encumbered years where food inflation for groceries was well below 1 percent.

Rosson predicted the high side of the USDA's range for 2011 is probably most accurate, with the price of basic crops like wheat and corn on the rise.

"It would be reflected in the grocery store eventually," said Scott Irwin, a professor of agricultural economics at the University of Illinois and a member of the Agricultural & Applied Economics Association board.

Irwin said 1 million acres or more of cropland could be completely wiped out from the flooding in the southern states. But he said the delayed planting in the northern Midwest, in his neck of the woods, could have even more of an effect on food prices nationwide.

Underscoring how far behind farmers in the water-logged region are, Irwin said Ohio has only planted 2 percent of its corn crop, compared with 74 percent by this time last year; Indiana has planted 4 percent of its corn crop, compared with 80 percent by this time last year, he said.

The farmers will, most likely, eventually be able to plant those crops, but the late planting exposes their crops to more risks.

"We can still recover and have very good crops," Irwin noted. But it will take some good fortune.

"We're going to have to have exceptionally good summer weather to recover from these delays," Irwin said. "We basically can't have anything else go wrong from here on out."