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U.S. Drought Threatens Price Of Food
2012-07-11 16:14:49 (216 weeks ago)
Posted By: Intellpuke

The worst drought to hit the United States in nearly 25 years is threatening to drive up food prices around the world.

The price of corn, the staple crop of much of the mid-west and the prairies, has risen by a third in the past month and rose again on Monday after a U.S. government report said farmers would not yield as much from their parched fields as expected. Higher prices are likely to be passed on in the cost of hamburgers and steak and also affect a range of other foods such as corn flakes and bread.

Almost a third of America's corn crop is already showing signs of damage and a report released by the U.S. Department of Agriculture on Wednesday forecast that farmers would only reap a fraction of the corn expected last spring when they planted 96.4 million acres (39 million hectares) – the most since 1937.

The USDA now predicts that the corn crop will average just 146 bushels an acre, down 20 bushels from its previous forecast. It estimates the harvest at 12.97 billion bushels of grain, down 12% from the 14.79 billion bushels forecast in June. One bushel of corn equals 25.4 kilograms.

A mild and early planting season had raised hopes of a record corn crop. But then the drought came, sweeping from Ohio to California, and the hot weather is showing no signs of abating.

"To see something on this continental scale where we're seeing such a large portion of the country in drought you have to go back to 1988," said Brad Rippey, a USDA agricultural meteorologist. That year saw corn yield drop by nearly a third.

(story continues below)

While corn is pollinating, temperatures over 95F (35C) can stunt the growth of ears and prevent kernels from fully developing.

David Kellerman, a farmer in southern Illinois, one of the worst-hit areas, told AP: "Monday, Tuesday and Wednesday we had 108F. It just pretty much fried the corn."

The 12% cut in the yield forecast is the largest in memory and reignited a rally in grain prices. Corn on the Chicaco Board of Trade initially jumped 23 cents and later settled to a 15¢, or 2% gain, to $7.76 a bushel. Prices have climbed 34% in the last month.

Wheat and soybean stocks have also been hit by the drought and are lower than previously estimated.

Plunging corn yields are likely to push up meat prices, as corn is used to feed cattle. Meat prices were already rising and were expected to stay high after last year's drought in Texas forced many ranchers to scale back their herds.

Corn is also used as an ingredient in corn flakes, ketchup, bread and fizzy drinks, although it accounts for a small fraction of their costs compared to transport and marketing. Food prices typically climb about 1% for every 50% increase in average corn prices, said Richard Volpe, a USDA food markets research economist.

Corn, wheat and soybeans, the three most common U.S. crops, are used in a variety of foods from cereals and salad dressing to scones and cooking oil.

The U.S. government has already predicted food prices will increase by up to 3.5% this year.

However, even farmers who lose much or all of their corn are unlikely to go under. Most take out crop insurance to cover weather-related losses.

Intellpuke: You can read this article by Guardian Correspondent Julia Kollewe in context here:

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