Record drought will mean higher food prices
Well, it’s official. One of the worst droughts since 1988 has hit the US with a vengeance and shows no signs of letting up.
The moderate drought in parts of eastern Nebraska, northern Illinois and much of the top corn and soybean state Iowa was changed to a severe drought in the past week, climate experts said Thursday, and forecasts showed little relief in sight.
Prices of both corn and soybeans soared to all-time highs on Thursday, with corn climbing more than 50 percent in the past four weeks alone due to the worsening drought, squeezing ethanol and livestock producer margins and chilling export demand.
More extreme heat and scant rains were expected in the area over the next week, suggesting the poorest crop conditions since the historic 1988 drought would continue to erode, sapping yield potential at a time when supplies will be uncomfortably tight.
“We’re seeing increasing areas of moderate to severe drought across Nebraska and Iowa, and nothing has improved in Illinois. In fact, things have gotten worse,” said Sterling Smith, analyst with Citigroup.
Stronger yields from those areas had, until recently, had been expected to offset lower production from drought-decimated crops in Indiana, Missouri and southern Illinois.
Now it looks like higher food prices are just around the corner. Even if Mother Nature provides some relief in the form of rain, the damage is already done for this year.