CHICAGO – The worst U.S. drought since Ronald Reagan was president is withering the world’s largest corn crop, and the speed of the damage may spur the government to make a record cut in its July estimate for domestic inventories.
Tumbling yields will combine with the greatest-ever global demand to leave U.S. stockpiles on Sept. 1, 2013, at 1.21billion bushels (30.89 million metric tons), according to analyst estimates compiled by Bloomberg. That’s 35 percent below the U.S. Department of Agriculture’s June 12 forecast, implying the biggest reduction since at least 1973. The USDA updates its harvest and inventory estimates Wednesday.
Crops on July 1 were in the worst condition since 1988, and a Midwest heat wave last week set or tied 1,067 temperature records, government data show.
Fort Wayne had, for the first time, a four-day streak with temperatures above 100. Prices surged 37 percent in three weeks, and Rabobank International said June 28 that corn may rise 9.9 percent more by December to near a record $8 a bushel. The gain is threatening to boost food costs the United Nations says fell 15 percent from a record in February 2011 and feed prices for meat producers including Smithfield Foods.
The drought is much worse than last year and approaching the 1988 disaster, said John Cory, the chief executive officer Prairie Mills Products, a grain processor in Rochester, Ind. There are crops that won’t make it. The dairy and livestock industries are going to get hit very hard. People are just beginning to realize the depth of the problem.
While the U.S. harvest is about two months away, the drought reached plants at the most vulnerable period in their growing cycle, said Nick Higgins, a London-based analyst at Rabobank, predicting a 13.49 billion-bushel harvest.
Based on current soil moisture and June temperatures, the drought is probably the worst since 1988, said Joel Widenor, a vice president at the Commodity Weather Group in Bethesda, Md.
The drought may spark a rebound in global food prices this month through October, halting a slide that sent costs in June to the lowest level in 21 months, said Abdolreza Abbassian, an economist in Rome at the United Nations’ Food and Agriculture Organization.
Corn is key because of its widespread use as a base ingredient in so many foods and for its use in feed for livestock, said Stanley Crouch, who helps oversee $2 billion of assets as chief investment officer at New York-based Aegis Capital Corp. We are at the tipping point.