Snack and Bakery

Drought worsens, crops are damaged, food prices may soar

July 20, 2012

Corn and soybeans in the U.S. Midwest are baking in what has been an unrelenting heat wave, as fears are rising about large crop losses that will boost food and fuel prices and cut exports and assistance from world’s top shipper of the key crops. Consumers could soon be facing steeper bills at the grocery store as a result.

Nearly 40% of the corn planted across the nation is in poor or very poor condition, compared to just 11% at this time last year, according to the U.S. Department of Agriculture (USDA). The country’s corn and soybeans have deteriorated even more than grain traders had expected, and the USDA is cutting weekly corn crop condition ratings by the biggest amount in nearly a decade. After weeks of growing drought, some lucky farms have been doused by scattered thunderstorms in the past few weeks. Still, weather forecasters warn that the heat and dryness could only intensify through the end of July and possibly beyond.

"We're moving from a crisis to a horror story," says Purdue University agronomist Tony Vyn. "I see an increasing number of fields that will produce zero grain."

The drought scorching the Midwest is the worst since 1956, according to the National Oceanic and Atmospheric Administration’s report posted on its website. It’s affecting 55% of the land mass in the lower 48 states.

Corn crops are probably in the greatest danger. Plants are trying to pollinate to let ears fill with kernels, a period when adequate moisture is vital for final yields. The U.S. ships more than half of all world exports of corn, which is made into dozens of products, from starch and ethanol to livestock feed.

"We need soaking rains now," says AgResource Co analyst Dan Basse. “We need 2 to 3 inches, and that's not in the forecast.”

"We haven't seen any rain at all, and based on that, food inflation is definitely a real threat," says Phil Flynn, senior energy analyst at the Price Futures Group in Chicago.

Source: www.reuters.com, www.cnn.com