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CEDAR RAPIDS, IOWA -- Floyd Fratz is a no-nonsense man whose worn features reflect years in the fields growing corn and soybeans outside of Palo, Iowa, just northwest of Cedar Rapids. Frantz, 76, fashions himself an old-time farmer who toils in much the same way his parents farmed when they bought the fields adjacent to the Cedar River in the 1930s.

But for all the history and lessons passed down from his parents, Frantz seemingly blundered this year. Big time.

Living on what’s known as a 100-year flood plain, he’s never bought crop insurance. Too expensive. Maybe it’s only once every century, but his land is expected to flood, pushing premiums higher. But c’mon, Floyd figured. One hundred years. What’s the chance?

“Nobody’d ever thought the (Cedar) river would get into Palo,” Frantz said as he gave a tour of his farmland—now a mottled landscape of waterlogged plants, bare patches of soil and mounds of sand. “We’ve never, ever had anything like that.”

In more than 50 years of farming, Floyd Frantz has never seen floods on the scale of those that washed away his corn fields in June.

In common with many farmers throughout the Corn Belt who live near the rivers that give life to the land—the Mississippi, the Iowa, the Cedar—Frantz suffered catastrophic crop losses this June as rain fell in torrents and those rivers crested their banks and washed away already fledgling corn and soybean plants.

Hard to imagine, but the damage goes well beyond farmers like Frantz, with a ripple effect reaching into ranching, food manufacturing and the already troubled ethanol industry. And experts warn that increasingly erratic and extreme weather, added to the paving-over of rural America, will only lead to more frequent flooding and devastation.

Frantz will try to salvage what’s left of his corn crop and recoup some of his losses with the soybeans he planted in the bare spots on his 230 acres.

Still, he is not optimistic about making up for the damage. Asked if he had tallied up his losses, he responded with a resigned, “Oh lord no, I haven’t.” And then, upon further reflection, “I guess I can be thankful it ain’t any worse.”

Dwindling Stocks

How bad is the damage? The United States Department of Agriculture estimates that farmers will harvest about 79 million acres of corn this year. That’s only about 2 percent less than was expected before the flooding. It may not seem catastrophic, but experts say even such a small loss could have troublesome implications at a time like this, when the American economy is sagging and the corn supply is already being stretched to its limits.

Climatologists estimate that precipitation in the Midwest has increased 10 percent since the 1950s. Erratic weather is expected to continue for another 15 years.

It's strange to say there might not be enough corn in this country, whose waving fields of grain are iconic in their abundance. Last year, farmers harvested 86.5 million acres of corn, the most ever, and this year’s harvest still promises to be the second largest on record even after the flood damage. But food, livestock and ethanol producers, all of whom depend on corn, are demanding a larger share of the corn supply, placing unprecedented demand on the crop.

Corn stocks—the corn held onto by farmers that hasn’t already been sold—are nearing their lowest levels in 30 years. The USDA estimates the inventory will be 1.3 billion bushels at the end of the 2008/2009 season, almost a third less than the 25-year historical average of around 1.8 billion bushels.

Low levels of corn stocks mean there is not as much of the grain to be had by competing interests, such as food and ethanol producers. This translates into higher corn prices, according to economists at the USDA.

The price of a bushel of corn shot past $7 in the immediate aftermath of the flooding on fears of a shortage. Prices have fallen below $6 a bushel since then, but that's still nearly double the near-record prices of last summer. Since corn finds its way into products in every aisle of the grocery store—either directly or indirectly—consumers aren’t likely to see a respite from high food costs.

About 40 percent of the corn supply in the U.S. will be used for animal feed this year, according to the USDA. When the price of corn goes up, it is more expensive to feed animals like chickens, cows and pigs, and that is reflected in the retail prices of food products made from these animals.

The price of eggs alone has gone up by nearly one-third in the past year, estimates the federal Bureau of Labor Statistics, which keeps track of retail food prices to measure inflation. And since it takes a few months for high feed costs to become apparent on supermarket shelves, higher prices are yet to come.

Controversial Mandate

Critics say these increases are due to the ethanol industry devouring corn at a growing rate, and that a mandate requiring a certain amount of renewable fuels to be in the nation's fuel supply is artificially increasing demand for the grain.

Critics say ethanol plants, such as this one in Cedar Rapids operated by Archer Daniels Midland Co., are hogging too much of the corn supply. A mandate requires 9 billion gallons of renewable fuels to be in the nation's fuel supply this year.

Ethanol production in the U.S. has swelled dramatically since 2005, when new energy law provided new financial incentives for the production of renewable fuels. This year, experts predict U.S. producers will make about 9.5 billion gallons of ethanol, half-again as much as the 6.5 billion gallons made in 2007, and more than three times the 2.8 billion in 2003, according to the Renewable Fuels Association, a trade group based in Washington.

The marriage of food and fuel makes for interesting juxtapositions, as gargantuan ethanol factories rise like steel leviathans out of verdant, green rows of corn and soybeans. One such facility in southwest Cedar Rapids dominates the landscape, and is visible from miles around. Operated by Decatur, Ill.-based Archer Daniels Midland Co., the facility had to temporarily suspend operations for a few days this summer because of the flooding.

The USDA projects that about 4 billion bushels of corn will be used for ethanol production this year, nearly a third of the U.S. corn supply, and an increase of more than 30 percent above the amount used last year.

Jockeying for a share of the corn supply has reached such a point that special interests are pressuring lawmakers to change the rules of the game. In July, U.S. Rep. Bob Goodlatte, an eight-term Republican from Virginia, led 50 other GOP House members in asking the U.S. Environmental Protection Agency to halve the requirement to blend 9 billion gallons of grain-based renewable fuels with gasoline this year under the Renewable Fuels Standard.

“The Renewable Fuel Standard (RFS) is a significant factor in the increased cost of commodities which is causing severe economic harm for low-income Americans and livestock producers,” Goodlatte said in a letter sent to the EPA.

The request for a waiver of the mandate echoed a similar appeal sent in April to the EPA by Republican Texas Gov. Rick Perry along with several poultry and livestock trade associations, from the National Cattlemen’s Beef Association to the National Chicken Council. The EPA decided earlier this month not to change this year’s mandate.

Reducing the renewable fuels mandate, opponents argue, would free up some of the 4 billion bushels of corn slated for ethanol production for animal feed and other uses. But whether cutting the mandate would have the desired effect of easing demand for corn and lowering food prices is far from clear. Studies looking into the effects of a reduction in the mandate are contradictory.

Ed Kibbie, of Palo, Iowa, lost most of his corn crop to heavy rains and flooding. He has filled in bare patches of land with soybeans in hopes of recouping his considerable losses.

One study released in June by Keith Collins, the USDA’s chief economist for 15 years before his retirement at the end of last year, concluded that the renewable fuels mandate was responsible for artificially inflating the price of corn and contributed to high retail food costs.

“Ethanol could account for 60 percent of the expected increase in corn prices between 2006/07 and 2008/09,” according to the study, which Collins performed as a private economic adviser for Northfield, Ill.-based Kraft Foods Inc. This conclusion differs greatly from the USDA’s claim that ethanol production accounts for as little as a 3 percent increase in the price of food.

Another study by Thomas E. Elam, president of Farm Econ LLC, an agriculture consulting firm located in Carmel, Ind., also showed a link between ethanol production and high food prices. But the study went further and showed that a waiver of the renewable fuels mandate would only lead to a small increase in the price of gas on the scale of a few cents per gallon. This flies in the face of ethanol producers and trade groups, who say ethanol production significantly lowers the price of gas at the pump.

Still other studies show that waiving the mandate would have the exact opposite effect, significantly raising the price of gas while not having much of influence on the price of food.

Chad Hart, an agricultural economist at Iowa State University, deals extensively with the economics of the ethanol industry. He and co-workers have found that a waiver of the renewable fuels mandate would not significantly reduce the production of ethanol.

“When you look at the mandate, especially in the short term here--2008, 2009--is that what’s driving the market today?” Hart said. “We would argue no it’s not. Whether the mandate is maintained or dropped, it doesn’t matter.”

Though corn prices are high, a recent increase in the price of ethanol—to $2.35 per gallon from a low around $1.60 last year—has allowed some producers to remain profitable and continue production, at least for now, Hart said. In other words, ethanol production is profitable enough on its own, regardless of the mandate.

What’s more, a study released in April by Xiaodong Du and Dermot Hayes, two of Hart’s colleagues at Iowa State, showed that ethanol production in the U.S. lowers gas prices by 29 cents to 40 cents per gallon, depending on the region. About half the gasoline sold at the pump in the U.S. is blended with ethanol, typically at a ratio of 2 percent to 10 percent ethanol. Since ethanol is less expensive than gasoline, this lowers the retail price of gas.

Ethanol supporters say these studies make clear the necessity for producing the fuel.

“If the mandate was cut in half as the governor (Perry) was suggesting, first of all, food prices will not materially change, as some have suggested,” said Brian Jennings, executive vice president of the American Coalition for Ethanol, a trade group based in Sioux Falls, S.D. “Gas prices will be higher. If the mandate is cut in half, will ethanol really be taken off the market or not? The answer is we don't know for sure.”

Changes in the Heartland

No matter the effect of the renewable fuels mandate, the fact that so many large and disparate industries across the United States rely heavily on a single crop—corn—means that unless those industries can find another source of input, such strains on the corn supply will continue.

Virgil Schmitt, an agronomist at Iowa State, said Corn Belt states such as Iowa need to rely less on corn and soybeans in order to increase economic stability and farmland diversity. “Many of us have been saying for many years that we desperately need to have a third and fourth crop,” Schmitt said.

Alternating farmland between corn and soybeans every year, according to Schmitt, depletes the soil. It would be much better if there were a three-year crop rotation, Schmitt said. The problem is that there is not an economically viable third crop that could be rotated with corn and soybeans in the Corn Belt.

So for his part, Schmitt hopes for a transition to ethanol made from sources other than corn, such as sweet sorghum, a grain grown throughout the world for its molasses-like syrup that could be an advantageous source of ethanol. If farmers grew sorghum for ethanol, it would take some of the pressure off of corn, Schmitt said.

“As this region moves more into the bioeconomy, we may have more opportunities there,” Schmitt said.

But any shift away from corn production would be a difficult one. Farmers are used to the corn-soybeans planting routine, and regard any attempt to wean them off it with suspicion. To switch to a different crop, farmers would have to see a demonstrated improvement in profits for a substitute.

And numerous agricultural programs and subsidies contribute to ensuring that farmers are paid well for producing corn no matter the market price. A newly minted federal farm bill extended billions of dollars in controversial annual payments to farmers of cash crops for at least another five years.

The bill passed both houses of Congress in May, overriding a presidential veto with support from farm state representatives. President George W. Bush and others said the bill didn’t go far enough to reform bloated subsidy payments.

The bill also didn’t do much to encourage farmers to grow anything other than the five cash crops American agriculture has relied on for decades—corn, soybeans, rice, wheat and cotton. While the new farm law does contain new financial incentives for farmers to grow crops for next-generation biofuels and specialty crops—like those found in farmers markets—it is not nearly as much as the tens of billions that go towards the big five.

A further risk to future corn harvests is increasingly erratic weather. Floyd Frantz’s 100-year flood plain can now be expected to flood every 10 to 15 years, according to Elwynn Taylor, a climatologist at Iowa State.

“The annual rain has increased by about 10 percent in the entire Midwest,” since the 1950s, Taylor said. “That’s moved the Corn Belt west, doubled the flow in the rivers. They’re over the banks six to eight times as often.”

That means farmers who haven’t seen a devastating flood since their grandfather’s time could see one every 15 years. Land that used to be viable for growing corn because it only flooded once every 6 years or so now tends to flood every year.

Taylor expects the increase in precipitation to level off based on historical analysis of weather cycles, but said the pattern of erratic weather will likely continue for at least another 15 years.

“If we look at history as recorded by trees, we’ll hit a peak of extreme weather around 2025,” Taylor said.

Whatever is to come, it is almost certain that the future breadbasket and heartland of America will look different, encroached by development and subject to a changing climate.

Producing for the Marketplace

For generations, Kirk Siegle’s family has been farming land near Oakville, Iowa, about an hour’s drive southeast of Cedar Rapids, near where the Iowa River empties into the Mississippi. Siegle, 50, was never concerned about flooding before. Since his grandfather’s time there haven’t been any floods on the land his family farms.

Kirk Siegle, of Oakville, Iowa, surveys the damage to one of the levees meant to keep the Iowa River at bay. Siegle says development upstream is channeling more water into the river.

This year, though, Siegle will have to find some way to fulfill the contracts he had made before the flooding. Siegle made an agreement to deliver 15 percent of his future corn and soybean harvest at a price of $4.50 per bushel on corn and $9.60 on beans. He had expected to make money on the deal. But with 80 percent of his 1,100 acres of corn damaged, and 40 percent of his 600 acres of soybeans, all of his remaining production may have to go towards fulfilling those contracts. He won’t be able to take advantage of $7-plus corn prices to make up some of his losses.

“I did have contracts for fall delivery for this year’s crop,” Siegle said. “I probably will not have enough grain to fulfill those contracts, so I’m going to have to work with the buyers and see what we can work out to get that contract satisfied, if not this year than maybe next year or the next.”

The farmland around Oakville, a one-traffic-light town of 500 in rural Louisa County, was some of the hardest hit in the nation by the downpours. In early July, after the flooding had receded in most other areas, farmland there still stood submerged—indistinguishable from river. Gravel roads led directly into the water, and signs sticking out from the river appeared to be for boat traffic. A saturated livestock carcass still lay on the road where county services had yet to remove it.

Still, the prospect of more flooding in the future will not deter Siegle from planting more corn and soybeans in the years to come, so long as they remain the most profitable crops to plant.

“As agriculture producers, we’re going to produce for the marketplace,” Siegle said. “We’re going to produce whatever makes us the most money.”