Corn futures soared to new highs following an announcement by the U.S. government that the devastating drought in the nation’s farm belt had destroyed over 1/6 of the corn crop in only one month.
The Department of Agriculture dramatically cut its estimate off the corn crop in the country by nearly 17% from its last estimate during July, to only 10.779 billion bushels. Corn futures were up over 3% on the news to a new record of $8.44 per bushel.
Prices of soybeans, corn and wheat have surged already close to 25-50% above their June prices, with soybeans and corn surpassing the 2007/08 highs due to the food crisis.
The U.S. exports more corn than any other country in the world and is an important exporter of other commodities such as wheat and soybean.
The spike in prices brings back memories of the food crisis of 2007/08 when new record highs caused rioting in over 30 countries from Haiti to Bangladesh.
The current food situation has caused great concern to politicians, as it is precarious and might even deteriorate into even more unfavorable results if the weather persists. One analyst said it still is not a crisis, but the risk is high and a crisis could easily occur.
The U.S. Department of Agriculture also cut its forecast for soybeans, predicting there would be just 2.69 billion bushels harvested, down nearly 11.7% from the July estimate. Forecasts came in well below expectations of the market. Traders and analysts were expecting the corn to be 11.02 billion bushels and soybeans to be 2.82 billion bushels.