Concerns are beginning to rise of the possibility of another global food crisis as drought in Russia and the United States start to increase.
The USDA now estimates an acre of corn will yield 123.4 bushels, which would make it the lowest per-acre yield since 1995, because of one of the worst U.S. droughts in at least a half century. Just last month, the USDA had estimated 146 bushels per acre. The total crop yield was slashed by nearly half from last month, to 650 billion bushels from 1.2 billion.
The news sent corn prices up Friday to a record $8.43 a bushel, breaking highs last seen during the 2007-08 global food crisis. Corn was still trading up $8.21 from a daily low of $8.10. The price of corn is up 41 percent since May 31. Soy is up 26 percent in the same period.
This USDA report is significant, because it's the first one in the growing season that's based on extensive surveys of farmers and the taking of field samples. The United States is a major producer and exporter of grains. In 2005, it produced 42 percent of the world's corn, with over half propagated in Iowa, Illinios, Nebraska and Minnesota, according to the Corn Refiners Association.
The USDA also cut projected yields for soybeans from a total of 3 billion bushels to 2.7 billion. Unlike corn, which has passed its pollination stage, soy could still benefit from late-season rains. However, the soy crop yield still faces the prospect of being the lowest in nearly 40 years.
"Several urgent actions must be taken to address the current situation to prevent a potential global food price crisis," Shenggen Fan, director general of the Washington, D.C.-based International Food Policy Research Institute, told Reuters.
A 2009 report in the Harvard International Review, written in the wake of the 2007-08 food crisis, questioned the U.S. food-to-fuel policy: "Why is corn grain being converted into fuel, while nearly 60 percent of the world population goes hungry? In particular, why is $6 billion to $7 billion being spent to subsidize and encourage corn ethanol production? Unfortunately, the United States continues to produce corn ethanol, because politicians find it politically useful."