Food Price Spike Dead Ahead: US Cuts Corn Crop Forecast By 12% As 56% Of America Is Under Drought Conditions

Tyler Durden's picture

Who knew the next black swan would be deep fried? The biggest piece of imminent food inflation news over the past months, coupled with what is shaping up to be another record hot summer (for the best tracking of real-time electricity consumption primarily for cooling news we recommend the following PJM RT tracker of power load), has been the collapse in the corn harvest due to the worst drought since 1988 as 56% of America is in drought conditions. Today, the US just added some burning oil to the popcorn by cutting the corn-crop forecast by 12% to 13 billion bushels on expectations of a 13.5 billion harvest. Then again, who needs corn, when you can have cake?

Bloomberg explains:

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Harriet Wanger's picture

Do androids dream of electric sheep?

adr's picture

How about in the case of severe drought we ban the use of food as fuel. There is plenty of corn for human consumption out there. The problem is the millions of acres used by corporate farms to grow corn to get massive government subsidies for ethanol.

Farmers are better off planting a crop and selling the harvest at a roadside stand. Playing with Wall Street will always leave them burned.

I guess that is why the family farm is pretty much gone. Most farmers don'teven own their own crop anymore. They harvest it and are paid by big agro.

Obama's toast wen middle Ameica sees the price of Budwieser go to $20 for a six pack. YOU MAY TAKE OUR FREEDOM, BUT YOU MAY NEVER TAKE OUR BEER!

duo's picture

ethanol has enticed farmers to grow corn for the 4th year in a row in the same fields, needing more and more nitrogen fertilizer, and of course the worms and other pests benefit from tha lack of rotation, and they develop reisitance to pesticides/BT faster.  What no one seems to understand is that TOPSOIL is a consumable!

Lednbrass's picture

Yes, and this is the true danger of the Monsanto Roundup Ready Frankencrops.

whoopsing's picture

I'm guessing its raining near you Harriet

Al Huxley's picture

Big fucking deal.  JPM and the rest can just sell a ton of corn short, thus demonstrating the lack of demand for corn,and the price will promptly go down and we can all eat well and cheaply. I love this paper economy!

mendolover's picture

I don't eat that GMO shit anyway. 

Never One Roach's picture

Farmers are protected..I'm sure they've hedged with future contracts with MFG of PFG...right?  After all, those funds are there to protect farmers.

bidaskspread's picture

So that's how they are going to double exports in five years.

icanhasbailout's picture

We will get a gas spike too, a huge % of the US corn crop goes to ethanol

fnordfnordfnord's picture

Does this mean we can have real sugar in our cokes again?

DosZap's picture

When it gets bad cheer up, it can always be worse.(and it will)

Just waiting for the Owhammy shoe to drop.

If he gets another four years WE are all DOA.

The taxes hidden in the  HealthCare bill are going to hit us like a ton of bricks,and 90% of a 1000 Dr's surveyed said they were considering quitting the practice. 90%,they are refusing to lose money on more patients.

I have great insurance, and my Internist has so many patients(he's good),it takes an avg of 14mos wait to get a supposedly yearly physical.

Already no new patienta are being accepted, and the elderly are for saure.

The Dr's cannot make a dime off of the payout from the gub.

crawldaddy's picture

are you an idiot in real life, or do you just play one here on ZH?

crawldaddy's picture

what a load of shit.  STop with the bullshit articles already. Last year the output was 12.3 billion, this year it looks to be 13 billion, and you think an increase of 700 million bushels leads to some sort of food price spike.  WTF.

 

Stop with the bullshit

Broomer's picture

How much of this is being used for fuel production?

adr's picture

The Ethanol industry says that corn for ethanol consumption will fall 1% by 100million bushels.

Funny how the corn crop can be cut by 12%, yet ethanol corn consumption is only cut by 1%.

 

HMMMM, somebody isn't being honest here.

Broomer's picture

I guess that's because there is a mandatory percentage of fuel that must come from corn... right? I'm not American, and I'm not sure about this.

crawldaddy's picture

ITS not being cut by 12%, the forecast for the year was cut, its still on pace to far EXCEED last years crop.

crawldaddy's picture

not the point, Im sure its the same percentage as last year, so do you ahve a point?  My point is if you have an increase of 700 MILLION bushels, you arent going to have some sort of price spike.

erheault's picture

 One small problem it is called export where the price is higher that national price so if we even have a high yeild the export prices with world shortages due to population groth and weather problems will be higher so our supposedly surplus will be sold for export not local consumption,  Quite a large amount that we still have in storage has been sold a long time ago and is just being held in storage untill needed for exporters to arrange shipping.  Dont count your corn fritters untill you have them in your hand, shortages are real and growing worse. 

orangegeek's picture

I'll be cutting back on my  consumption of corn syrup and coca cola.

 

falak pema's picture

is the climate change meme going to make a new dust bowl in mid west USA?

The drought is awesome and corn on the cob will soon be a luxury, for those on food stamps. 

crawldaddy's picture

EXCEPT for the fact that corn production is actually UP this year.  But why allow facts to get in the way of all this nonsense.

crawldaddy's picture

wall street journal

The USDA now projects a corn harvest of 12.97 billion bushels, down from its record-breaking previous forecast of 14.79 billion bushels and below the previous record of 13.09 billion bushels in 2009. Production in the U.S., the world's biggest corn producer and exporter, would still be up from 12.36 billion bushels last year.

 

http://online.wsj.com/article/SB10001424052702303919504577520611695492558.html

 

so stop falling for this bullshit, near record crop harvest do not lead to food spikes.

skipjack's picture

Methinks somebodies don't understand the difference between prediction and reality...yet.

j0nx's picture

Wasn't there a big scare like this a few years ago when the major rain and floods hit that area? The doom from that never panned out if I recall.

adr's picture

With the reduced forecast, the corn is still expected to be the third highest on record and farmers still were not able to sell all of last year's record harvest. People forget that corn can be dried and stored in silos.

It turns out that hedge funds were actively buying corn storage last year to prevent the crop from being sold on the open market, depressing the price of corn.

We are being fleeced by traders, plain and simple. The rumors of rumors of a bad harvest have sent corn up 45% in one month, from prices that were already high. Total bullshit.

$745 for corn? maybe if there was no crop at all.

Thank you to the wonderful Fed for not only causing the S&P to double, but to also cause the price of just about everything else to double as well.

If you forced delivery of futures contracts and banned the monthly roll over, corn prices would plummet to $300 a bushel within a week. 99% of those that hold a contract wouldn't know what to do when a few thousand bushels of corn show up at their door.

 

Flakmeister's picture

The paper that forecast was printed on would be suitable to wipe your ass with if it had a tad more absorbancy...

This crop is going down the tubes....

sbenard's picture

... or arugula, if you're an Obama!

sbenard's picture

It's not just corn, either. Sugar, cotton, soybeans, wheat, and other food commodities are exploding too. This is a true, modern-day DROUGHT! If it continues, three months from now, it could be a true, modern-day FAMINE!

If the Fed unleashes more QE, food prices could go ballistic!

Monedas's picture

Drought is good for the solar industry !  Obama wins again !       Monedas     1929        Comedy Jihad The Dry Clouds Of Drought Have A Silver Lining

dark pools of soros's picture

this will give the white house the perfect chance to raise food stamp payouts and give a bigger kick to JPM for running that show!!  and walmart et all get more profits!!!  steal from the future!!  first to use inflated dollars always win!!

Flakmeister's picture

AGW is going to incinerate the Corn Belt slowly but surely over the next 30-50 years....

You can bank on it...

post turtle saver's picture

Corn yields in 2008 were 12B bushels, this year projections are dropping from 13.5B to 13B and for some reason that's the end of the world. What's next, "Peak Corn"?

Your grandchildren and great-grandchildren will be stuffing corn down their gullets in huge quantities 30-50 years from now. THAT you can bank on.

Flakmeister's picture

Yep.... just like the EIA was saying we would be producing 95 mmbpd of oil in 2012 not so many years ago....

I suggest you take a look at the following

http://onlinelibrary.wiley.com/doi/10.1002/wcc.81/full

Here is a free excerpt/synopsis:

https://www2.ucar.edu/atmosnews/news/2904/climate-change-drought-may-threaten-much-globe-within-decades

Edit: For some perspective, the PDSI during the Dust Bowl was around -6

http://www.ncdc.noaa.gov/paleo/drought/drght_pdsi.html

post turtle saver's picture

Worst case scenario you'll see a slight blip in silage and ethanol feedstock costs, nothing more. Given how much gasoline demand has gone down over the past four years I doubt you'll see any cost increases from this "Great Drought" at all (yes, that means the 'E' in 'E10' demand goes down with it). Recall also that we just came off the largest La Nina on record for 2010-2011 so of course we're ready to go into a dry cycle for the US Midwest. You can set your calendar to this stuff and most farmers do.

I know you like playing Chicken Little on this board but, frankly, most of us are immune to your shennanigans. Try it out on the college kids, they'll believe anything you tell them when it's all spiffy and academic like that.

blunderdog's picture

It would be a good thing if we cut down our corn production, anyway. 

Most of the worst crap sold as "food" in the market is corn-based, and cows' digestive tracts aren't well-equipped to handle corn, either.

Higher food prices in the short-term will suck, but it's not like there haven't been production problems with all kinds of stuff in the past. 

i-dog's picture

Interesting! Wheat production is UP 12% from 2011. Feed the cows on wheat...most other meat producers do.

post turtle saver's picture

Well, what's good for the goose is good for the gander. All your peak oil and drought reports are merely forecasts. Why should they be given any more credence than the others? You don't need to answer, I already know why... because forecasts that confirm your world view are 'legit' and those that don't are 'suspect'. Go sell it somewhere else, we're not buying.

Sakka's picture

We'll be your slaves if you feed us!

world_debt_slave's picture

Who needs cake when you can eat iPads.