The worst drought in the US in 25 years has wrought havoc on the country’s most important crops, putting the global economy at risk of its third food inflation shock in five years.
The US Department of Agriculture on Wednesday slashed its forecast for the corn crop by the most since the drought of 1988, cutting its 2012-13 production estimate by 12 per cent and its season-end inventory estimate by a hefty 37 per cent.
Richard Feltes, vice-president at broker RJ O’Brien in Chicago, said the lower crop “ups the risks of reintroducing food inflation as an issue affecting global recovery”.
“The drop reflects sharply declining crop conditions resulting from limited rainfall since early April, coupled with excessive heat across much of the producing area in late June and early July,” the agency said in its report.
Temperatures of about 40C in top farming areas of the US, including Illinois and Indiana, have had a devastating effect on grain and oilseed production, said agronomists and meteorologists. Joel Widenor, director of agriculture at consultants Commodity Weather Group, said June was the driest month for the corn belt since the same month in 1988.