US corn price forecast to rise sharply
Published: 10th Aug 2012 18:57:38
The US Department of Agriculture (USDA) has slashed its forecasts for corn production and predicted sharp price rises, due to a drought and heatwave destroying much of the country's crop.
It now thinks that this year's corn yield - the amount produced per acre - will be the lowest since 1995-96.
It predicts farm prices for corn will average $7.50-$8.90 per bushel. In July had predicted $5.40-$6.40 per bushel.
The US is the world's biggest producer of corn, soybeans and wheat.
The United Nations (UN) has warned that the dry spells in the Midwest could lead to higher food prices.
The UN's Food and Agriculture Organization (FAO) has called on the US to suspend its production of biofuel ethanol.
Under US law, 40% of the corn harvest must be used to make biofuel, a quota which the UN says could contribute to a food crisis around the world.
The US argues that producing much of its own fuel, rather than importing it, is good for the country.
The latest forecasts from the USDA suggest that corn production in 2012-13 will be 10.8 billion bushels, some 2.2 billion bushels less than it predicted last month and the lowest since 2006-07.
Drought in US bakes cattle and crops
The USDA lowered its corn yield forecast by 22.6 bushels per acre to 123.4 bushels, citing the extreme heat and dryness.
Dan Basse, analyst at Agresource, said there was room for the yield numbers "to come down more".
"For those of us who have been in the field, the crop numbers are likely to fall further," he said.
The USDA expects further rises in prices, and it is predicting that global corn trade will be sharply lower this month "in response to tighter US supplies and higher prices".
Corn is a staple food in many countries, and is also used in animal feed and to produce biofuel ethanol.
You're going to see the ripple of this go out for quite a distance”
Concerns about the impact of the dry weather in the US pushed corn prices up by 23% in July, according to the latest FAO food price index.
Writing in the Financial Times, the director general of the FAO, Jose Graziano da Silva, said suspension of the quota would allow more of the crop to be diverted for food production.
"The worst drought for 50 years is inflicting huge damage on the US maize crop, with serious consequences for the overall international food supply.
"The situation reminds us that even the most advanced agricultural systems are subject to the vagaries of the weather, leading to volatility in supplies and prices, not just on domestic markets, but also internationally."
Rick Whitacre, a professor of agricultural economics at Illinois State University, said consumers may see price rises in many food products because corn is used in everything from cereal to cake mixes to cosmetics.
Beef and pork prices could rise by as much as 4% to 6% as many farmers have sold livestock as pastures dry up and feed costs rise.
"You're going to see the ripple of this go out for quite a distance," he said.
By law, 13 billion gallons of biofuel must be produced in the US this year. The country's Renewable Fuel Standard, as the law is known, was designed to reduce greenhouse gas emissions and dependence on imported oil. It has long been controversial, with many blaming the quota for pushing up corn prices.
Devastation has come out of a clear blue cloudless sky, the lack of rain parching good ground into a cracked, pale grave for the crops”
The US Agriculture Secretary Tom Vilsack said the biofuels standard was having a positive impact on the country.
"It is impacting in a positive way the cost of gasoline in this country - some estimates put it at 25 cents to as much as $1.30 less for gas because we have a biofuel industry.
"There are jobs connected to that industry and less reliance on foreign oil. The question is: Is the market responding to concerns about supply and the answer is yes.
"Exports are down just a bit and ethanol production is down from between 10% and 30%, depending on the part of the country."
The United Nations is not alone in calling for the quota to be suspended. Livestock producers in the US, worried about the cost of cattle feed, also want it scrapped and the governments of China, India and France have expressed concerns about the policy.
At 12:58:39 in EnglandA poem about the killing of PC Keith Blakelock during riots in north London was written by the man accused of his murder, a court has heard.
At 12:58:21 in SportKent have announced a pre-interest and pre-tax profit of £156,778 for the financial year to November 2013.
At 12:56:04 in ScotlandA hamster has been found abandoned inside a plastic play tube in Edinburgh.
At 12:55:09 in BusinessThe sometimes fraught relationship between leaseholders and their freeholders is going to be investigated by the Office of Fair Trading (OFT).
At 12:54:04 in HeadlinesIndia's Supreme Court has ordered the continuing detention of businessman Subrata Roy and asked his firm to come up with a plan to repay its investors.
At 12:53:21 in SportCrystal Palace winger Jason Puncheon has been fined £15,000 by the Football Association and warned about his future conduct for Twitter comments he made in relation to former boss Neil Warnock.
At 12:52:43 in HeadlinesA second witness at the murder trial of South African athlete Oscar Pistorius has told a court in the capital Pretoria she was awoken by the sounds of a fight early on 14 February 2013.
At 12:42:01 in PoliticsThere is a risk that "deliberate provocation" could give rise to a dangerous incident in Ukraine, Foreign Secretary William Hague has warned.
At 12:41:48 in EnglandA residential treatment programme for addicts which closed in Yeovil is to reopen after the charity running it merged with another organisation.
At 12:40:03 in ScotlandPolice Scotland has exceeded its target to recruit 1,000 additional officers.
Harvard CitationBBC News, 2012. US corn price forecast to rise sharply [Online] (Updated 10th Aug 2012)
Available at: http://www.ukwirednews.com/news/1445634/US-corn-price-forecast-to-rise-sharply [Accessed 9th Mar 2014]
News In Other Categories
Fawlty Towers star Prunella Scales has "a sort of mild Alzheimer's", her husband Tim West has revealed in the Radio Times.
Kent have announced a pre-interest and pre-tax profit of £156,778 for the financial year to November 2013.
The law needs to be changed to stop ticket touts overcharging fans ahead of the Rugby World Cup, an MP has said.
With the doors to its brand new £1million training centre officially open, one of the UK's leading apprentice training providers, Bristol based S&B Automotive Academy, is showcasing its world-class facilities by launching a series of foreign student exchanges for the first time in its 41-year history. To get a flavour of what life is like as an apprentice in the UK, the Academy hosted 16 apprentice engineers and bus drivers from the G9 Automotive College in Hamburg, Germany, as part of a Europe-wide vocational training initiative called the ‘Leonardo Programme’ with support from the European Social Fund. In a reciprocal arrangement, S&B will be sending nine apprentices to Germany during February 2012 so that they can get an appreciation of life in the automotive industry on the Continent. A further three German exchange groups are being planned for next year. Designed to assist the development of vocational skills and training across Europe, including work placements for trainees, the Leonardo Programme has a budget of €1.75bn, which is helping to encourage UK organisations to work with their counterparts abroad. In what is expected to be another challenging year for employers in the UK automotive sector, S&B’s Chief Executive, Jon Winter, claims that the exchange initiative will bring many benefits to the Academy and its apprentices: “In a world of global automotive brands, it’s important for our learners to understand the international context of the industry they have chosen to make their career. This new exchange programme will enable apprentices and Academy staff alike to achieve a better understanding of the challenges and opportunities within the automotive arena in Europe. With the Academy’s influence also extending to the USA and Asia, there’s every possibility that this initiative could move further afield in the future.” Continued Winter: “The need for skilled technicians across the world is on the increase and we actively encourage our apprentices to look at broader horizons during their training. Many of them have already learned the phrase ‘Vorsprung durch Gelehrtheit’, quite simply, ‘Advancement through learning.” In the 2010/11 academic year, S&B doubled the number of successful Apprenticeships over the previous year with some 350 apprentices graduating from the Academy. At the same time, achievement levels reached an all-time high with an overall success rate of 85%. For those learners on the Advanced Apprenticeship three-year programme, success rates were even higher, at over 98%. PHOTO CAPTION: As part of their exchange visit, S&B Automotive Academy arranged for the German apprentices to visit Hampshire bus operator, Bluestar, at its Barton Park depot. The students are pictured with S&B’s Andy West (3rd right) and Steve Prewett, Bluestar’s Area Engineering Manager (2nd right). Ends http://www.sandbaa.com
Apple has unveiled its new iPhone technology for cars at the Geneva Motor Show.