Food crisis fear as US drought pushes corn price to record high

| August 11, 2012 | 0 Comments

By
Hugo Duncan

16:16 EST, 10 August 2012


|

16:16 EST, 10 August 2012

The price of corn hit a record high yesterday as the US government warned that the worst drought in more than 50 years has devastated crops.

The US Department of Agriculture said corn production will fall 13 per cent this year to a six-year low after a scorching heat wave ravaged the country’s farms.

It said this year’s corn yield – the amount produced per acre – will tumble 16 per cent to the lowest level since 1995-96.

Drought: Grain silos are silhouetted against a dusty sunset in the US, where corn prices have shot up

Drought: Grain silos are silhouetted against a dusty sunset in the US, where corn prices have shot up

The alarming report sent corn prices
to an all-time high of $8.49 a bushel – taking the rise since the start
of June to nearly 60 per cent – amid fears supply will not keep up with demand.

Wheat and soybean prices have also rocketed by 25 per cent and 50 per cent respectively in recent weeks and experts warned the increase will lead to higher prices for consumers around the world.

‘The US drought means that global
corn supplies will be critically tight for the next year,’ said William
Tierney, chief economist at Chicago-based farming consultant AgResource.

‘Livestock and milk-product prices
will have to rise to cover the increased feed costs. Eventually, global
consumers will have to pay the bill.’

America is the world’s largest grower
and exporter of corn  and a key supplier of other food commodities such
as soybean and wheat. But farmers have been rocked by the worst drought
for 56 years and the hottest July since 1936.

The United Nations warned that the
dry spells in the US Midwest will drive up food prices further –
reviving memories of the 2008 food crisis when record prices sparked
riots in developing countries around the world.

High food prices were also a factor in the Arab Spring uprisings of 2011.

Jose Graziano da Silva, director
general of the UN’s Food and Agriculture Organisation, said: ‘The worst
drought for 50 years is inflicting huge damage, with serious
consequences for the overall international food supply.

‘The situation reminds us that even
the most advanced agricultural systems are subject to the vagaries of
the weather, leading to volatility in supplies and prices, not just on
domestic markets, but also internationally.’ 

The US Department of Agriculture said it now expects a corn harvest of 10.8bn bushels this year – down 13 per cent on last year and down 17 per cent on its previous prediction just a month ago.

It forecast a yield of 123.4 bushels
per acre – down from 146 bushels it estimated in July and less than
147.2 bushels last year.

Dry weather in Russia and a lighter than expected monsoon season in India are also threatening world grain supplies.

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