US Slashes Corn Production Estimates

This is a huge downward revision -- and a very big deal in agricultural land:

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 on Wednesday slashed its forecast for the corn crop by the most since the drought of 1988, cutting its 2012-13 production estimate by 12 per cent and its season-end inventory estimate by a hefty 37 per cent.

The US is the world’s largest corn exporter and is a key supplier of other food commodities including soyabean and wheat. The USDA monthly estimates are among the most closely monitored barometers of food commodities markets.

\The much lower-than-expected size of the US crops sent the price of corn and soyabean higher, reviving memories of the price jump in 2007-08 during the food crisis and the surge in 2010-11 after Russia banned exports of grains.

However, policymakers do not believe the world is facing a new food crisis because the global supply of wheat and rice, the two commodities most important for the world’s food security, remain relatively plentiful and prices are still below previous highs.