U.S. corn and soybean crops, the world's largest, are in the worst condition since the last major drought in America's breadbasket in 1988, the government said on Monday, pushing up grain prices and raising the prospect of global food-price inflation.
Corn and soybean prices soared at the Chicago Board of Trade (CBOT), based on forecasts that thirsty crops will get no relief for at least another week, although a record-shattering heatwave abated over the weekend in the eastern half of the country.
On Monday, the U.S. Agriculture Department said its surveys showed only 40 percent of the corn and soybean crops were rated in good to excellent condition, the lowest rating at this stage of the season since the last severe U.S. drought in 1988.
Corn - used for everything from fuel ethanol to livestock feed - has been hit hard by dryness and heat in its critical pollination growth stage, when yields are established to a great extent and drought damage can be irreversible, analysts said.
Soybeans, a basic for fuels and feed and food use, mature a bit later than corn but have also baked under severe stress.
The CBOT July soybean contract set a record high of $16.65 a bushel on Monday, up nearly 3 percent on the day, and July corn jumped more than 5 percent to $7.77 a bushel. Corn prices have risen 30 percent in the past month to within striking distance of last summer's record price of $7.99-3/4 a bushel.
The implications for the world food system of U.S. crop losses are massive. The United States exports more than half of all corn shipped worldwide and is a major supplier of soybeans to China, the world's most populous country.
Food price inflation takes time to feed into the grocery counter, but dairy, meat and poultry - all dependent on corn for feeding animals - generally feel the brunt first. Drought-shortened U.S. crops would also reduce America's ability to supply food aid to needy nations at a time when South America's farmers have also been hurt by drought.
The drought is also likely to hit already strained U.S. government budgets through disaster-aid payments and hurt insurance companies selling crop insurance.
The Agriculture Department will issues its updated monthly crop production and yield estimates on Wednesday.
RAIN NEEDED QUICKLY
Missouri farmer Will Spargo said that only a couple of inches of rain had fallen over the past four months in southeast of the state. He said irrigating fields was expensive and inadequate but dried-up streams left him little choice on Monday but to pull water from wells to give parched corn and soybean crops a bit of moisture.