The US government on Friday slashed estimates for global food
supply as a deepening drought withers corn and soybean crops in
America's heartland. 'Scary situation,' one analyst says.
A historic Midwest drought prompted the US government on Friday
to slash supply estimates for nearly everything in the US
cornucopia, including corn, soybeans, and sorghum - a move that
caused commodity prices to jump and concerns about the state of the
global food cupboard to rise.
US corn and soybeans are crucial to global food supply because
they are used for food, feed, cooking oil, and even motor fuel.
Reduced supply and higher prices mean that poorer, import-reliant
nations may not be able to replenish their food stocks.
"This is shocking," Dan Basse, president of Ag Resources, said
during a conference call on Thursday, ahead of the World
Agricultural Supply and Demand Estimates report from the US
Department of Agriculture. "This is getting people at the United
Nations very concerned. The poor in the world are going to see
tremendous pressure on their budgetary expenditure for calories.
This has become a very scary situation, particularly for those in
the world who are impoverished."
With the release of the global supply and demand report Friday
morning, prices on the commodities exchange in Chicago rose to all-
time highs for corn and soybeans, the hardest-hit crops so far. The
estimate for the US corn crop is at the lowest level since 1995-96,
when many fewer acres were planted.
The report piggy-backed on the release Thursday of the United
Nations Food and Agriculture Organization's Food Price Index, which
showed global food prices rising by 6 percent, largely because of
the US drought. Untimely rains in sugar-producing Brazil and dry
conditions in Russia's wheat belt, too, have taken a toll.
The hottest July on record in the Lower 48 and scant rainfall
have created the widest US drought since 1956, wiping out much of
the corn and soybean crops, which are used globally and domestically
for food, feed, and ethanol production. In the US, which is the
world's top exporter of corn, more than half the crop is now
considered in "poor" condition. The Agriculture Department on Friday
slashed yield estimates by 12 percent, from 146 bushels per acre to
123 bushels per acre.
American farmers had planted the largest corn crop ever this
year, in response to high commodity prices and high global demand.
The US was supposed to be "swimming" in corn this fall. Instead, the
harvest will be a "train wreck," Kelly Wiesbrock, a fund manager for
Harvest Capital Strategies, tells the Reuters news service.
Higher commodity prices mean poorer countries will import much
less, putting millions of people on the lower rungs of the global
food chain in jeopardy, and potentially creating a situation similar
to the world food crisis of 2007-08. In all, estimates for this
year's global grain supply are down by 180 million metric tons -
enough to fill about 360 supertankers to the brim. …