All major crops are likely to record a drastic decrease as for three years in a row a drought like situation continues across the world. Not only are the crops affected but food-import costs are also expected to reach $1.24 trillion, according to the United Nations.
Combined inventories of corn, wheat, soybean and rice are expected to drop 1.8 per cent to a four-year low before harvests in 2013, the US department of agriculture estimates. Crops in the US, the biggest exporter, are in the worst condition since 1988, heat waves are battering European crops and India’s monsoon rainfall already is 20 per cent below normal. The International Grains Council began July by forecasting record harvests. It ended with a prediction for a 2 per cent drop in output.
The speed of the destruction drove corn and soybean prices to records last month and wheat to a four-year high. For investors, crops are the best-performing commodities this year, and Goldman Sachs Group Inc., Macquarie Group Ltd and Credit Suisse Group AG say the trend will continue. The UN expects food costs to rise, less than two years after record prices pushed 44 million people into extreme poverty and contributed to uprisings in North Africa and the Middle-East.
“People thought we were going to be swimming in corn by the end of the year,” said Kelly Wiesbrock, who helps manage $1.3 billion of assets for Harvest Capital Strategies, a San Francisco-based hedge fund. “Then the month of June hit and into July, and it’s just been a train wreck.”
Wheat gained 40 per cent to $9.135 a bushel this year on the Chicago Board of Trade, soybean appreciated 31 per cent to $15.8125, and corn rose 26 per cent to $8.165. They were the biggest advances in the Standard & Poor’s GSCI Spot Index of 24 raw materials, which increased 2.1 per cent.
The US drought in June was the widest since December 1956 and the past 12 months were the hottest on record, weather data show. While the USDA anticipated a record harvest as recently as June, it cut the domestic corn forecast by 12 per cent on July 11, the most since at least 1990. The estimate will be reduced again when the department reports August 10, according to the average of 29 analyst forecasts compiled by Bloomberg.
The American drought is spreading beyond agriculture into power and fuel production. US nuclear plants’ output on July 27 was the lowest for the day since 2001 because water was too hot to be an effective coolant, government data show. Parched conditions will spread into North Dakota and central Texas through October and last across the Midwest, the main growing region, the Camp Springs, Maryland-based Climate Prediction Center said August 2.
Wheat gained 40 per cent to $9.135 a bushel this year on the Chicago Board of Trade, soybeans appreciated 31 per cent to $15.8125, and corn rose 26 per cent to $8.165. They were the biggest advances in the Standard & Poor’s GSCI Spot Index of 24 raw materials, which increased 2.1 per cent.