US President Barack Obama has directed the department of agriculture (USDA) to buy up to $170m of pork, lamb, chicken and catfish in a move to stem the impact of the US's worst drought in 50 years.

The move comes as the G20 group of countries were reportedly planning their responses to drought and soaring food prices around the world. The US is the world's largest exporter of corn, soybeans and wheat, and the drought has already sent prices to record levels.

Mr Obama made the announcement at the start of a three-day trip to Iowa, a swing-state the Democrats hope to win in November's election. The state has been hit hard by a drought that last week drove US corn prices to an all-time high.

The key battleground

The farming crisis is emerging as a key battleground in the presidential contest. Mr Obama is trying to pass a bill through Congress that he claims will aid farmers but has been stalled by Republicans over what they see as excessive costs.

Pressure for action intensified last week when the USDA warned food prices were set to soar after the drought forced farmers to abandon cornfields covering an area larger than Belgium and Luxembourg combined.

The department predicted yields for key crops including corn and soybeans, and lowered production forecasts for eggs, milk and pork. Blaming "extreme dryness" in the central plains and the corn belt, the USDA said it now expects this year's corn harvest to be the lowest since 1995-96.

Mr Obama is under pressure to drop laws mandating the amount of corn ethanol that must be produced. This year 13.2bn gallons of corn ethanol will be mixed with gasoline to meet federal renewable fuel standards. Its production will require about 40% of this year's crop.

Livestock farmers blame the mandate for driving up corn prices. Governors in Maryland and Delaware, two poultry-rearing states, have called on Mr Obama to reduce the size of the mandate.

‘Good time to buy’

The food Mr Obama intends to purchase will go toward "nutrition assistance" programmes, such as food banks. The President is to push the department of defence to speed up purchases and said it was a good time to buy "while prices are low, and freeze it for later". He went on: "Right now folks here in Iowa and across the heartland are suffering from one of the worst droughts in 50 years. Farmers and ranchers depend on a good crop season to pay the bills and put a roof over their heads, and I know that things are tough right now."

Last week the United Nations released a report that said world food prices had risen 6% in July, driven up by a 23% spike in corn prices. Oxfam called for urgent action and said the price rise threatened a return to 2008 when similar price rises triggered riots around the world as the UN said a billion people were going hungry. "This drought, combined with bad policies like ethanol mandates, has put the world's poor on a collision course with a food crisis," said Eric Munoz, senior policy advisor for Oxfam America.

The impact on the world's poor and on the fragile global economy is likely to be the topics under discussion by the G20 later this month. Officials plan to hold a conference call at the end of August and set a meeting for late September or early October, according to the Financial Times.

In a report to investors, Fidelity said the rise in agricultural commodity prices "could not be occurring at a worse time for the global economy with the eurozone sovereign debt crisis still in full flow, China slowing down and the US outlook looking increasingly uncertain. The biggest direct negative effect of higher food prices is on consumers, particularly in emerging markets," the report added.

"As consumers are forced to spend more on food items, discretionary spending is reduced in other areas, creating negative knock-on demand effects for other industries."

Copyright: Guardian News & Media 2012