The prevailing drought in more than half of all the counties in the United States might influence Philippine inflation rate on a limited scale, a government press release said.

The US Department of Agriculture has put 1,584 counties in 32 states as disaster areas and 1,452 of which are related to drought.

The U.S. Drought Monitor has also indicated that 66 percent of the country’s hay acreage is located in drought-affected area and about 73 percent of the country’s cattle acreage is also affected.

Among the affected crops, soybean registered 37 percent very poor to poor as of July 29, which the USDA said matched the lowest conditions observed during the drought in 1988.

Also, 48 percent of the corn crop was rated very poor to poor while 57 percent of pastures and rangeland were rated very poor to poor.

Earlier, the Bangko Sentral ng Pilipinas said that the on-going drought in the US was among the upside risk to the Philippines’ inflation rate and among the factors monetary officials were closely monitoring vis-a-vis its inflation-targeting policy framework.

Although corn and soybean are not among the Philippines’ staples, changes in the supply of these items will still have an impact on the inflation rate.

BSP Deputy Governor Diwa Guinigundo said that the drought in the United States might affect its wheat and corn exports.

“While there are other possible sources like Australia and Canada, the impact should be assessed carefully,” he said.

Guinigundo said the weight of these crops in the Philippines’ consumer basket “could be dominant.”

COL Financial vice president Juanis Barredo, meanwhile, said that the Philippine inflation rate might not soar since corn was not the country’s primary food. Its impact would be on the rate of price increases, he said.

He said that supply constraint would impact on several consumer stocks but stressed that the negative effects would be limited and that some analysts expected the drought to last for a year.

Inflation rate in the first half of 2012 averaged at three percent, the lowest end of the government’s three to five percent target for this year until 2014, the press release said.

The highest inflation rate this year was registered in January at four percent but it has since decelerated with the June level at 2.8 percent.

For July 2012, the central bank forecasts inflation to stay within the 2.6-3.5 percent range, the press release added.*

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