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 slashed its forecast for the corn crop yesterday by the most since the drought of 1988. It cut the 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, said the lower crop “ups the risks of reintroducing food inflation as an issue affecting global recovery”.
The US is the world’s largest corn exporter and is a major supplier of other food commodities including soyabean and wheat. The USDA monthly estimates are among the most closely monitored barometers of food commodities markets.