CHICAGO -- U.S. corn and soybean crops, the world's largest, are in the worst condition since the last major drought in America's breadbasket in 1988, the government said Monday. The conditions pushed up grain prices and raised the prospect of global food-price inflation.
Corn and soybean prices soared at the Chicago Board of Trade, based on forecasts that crops will get no relief for at least another week, although a record-shattering heat wave abated over the weekend in some parts of the country.
The U.S. Agriculture Department said Monday that its surveys showed only 40 percent of the corn and soybean crops were rated in good to excellent condition, the lowest rating at this stage of the season since the last severe U.S. drought in 1988.
Corn -- used for a wide range of products from fuel ethanol to livestock feed -- has been hit hard by dryness and heat in its critical pollination growth stage, when yields are established to a great extent and drought damage can be irreversible, analysts said.
Soybeans, a basic for fuels and feed and food use, mature a bit later than corn but have also baked under severe stress.
The implications for the world food system are massive. The United States exports more than half of all corn shipped worldwide and is a major supplier of soybeans to China.
Food price inflation takes time to reach consumers, but dairy, meat, and poultry -- all dependent on corn for feeding animals -- generally show the effect first. Drought-cut U.S. crops also would reduce America's ability to supply food aid to needy nations at a time when South America's farmers have also been hurt by drought.
"Corn is key because of its widespread use as a base ingredient in so many foods and for its use in feed for livestock," said Stanley Crouch, who helps oversee $2 billion of assets as chief investment officer at New York-based Aegis Capital Corp. "We are at the tipping point."
All of northwest Ohio is under some level of drought, with the area around Defiance County suffering the worst of it. "Three weeks ago many farmers realized this drought was heading into the direction that's worse than 1988," said Bruce Clevenger, the Ohio State University Extension educator for Defiance County.
Some farmers in Defiance County are expecting yields of just 25 percent of what they anticipated going into the year.
Comparatively, farmers in Wood, Lucas, and Ottawa counties are doing somewhat better, although they say they, too, could be facing devastating losses without adequate rainfall in the next two weeks.
The dry spell has dropped U.S. crop ratings for five weeks in a row and has wrecked what many analysts had projected to be a bumper crop this autumn after spring planting went smoothly.
"There are crops that won't make it," said John Cory, the chief executive officer of Indiana-based grain processor Prairie Mills Products LLC. "The dairy and livestock industries are going to get hit very hard. People are just beginning to realize the depth of the problem."
Before the drought, the Agriculture Department estimated farmers would produce a near-record corn crop and harvest an average of 166 bushels of corn from 96 million acres. Traders said the recent price rise reflected a yield closer to 140 bushels to 145 bushels an acre.
"Moisture demands from the plant have increased during this time period and there is just no moisture in the soil to draw from," said Shawn McCambridge, an analyst at brokers Jefferies Bache. "You still need the moisture, especially at this time of year when the crop is pollinating."
About 53 percent of the Midwest, where farmers harvested 60 percent of last year's U.S. crop, had moderate to extreme drought conditions as of July 3, the highest since the government-funded U.S. Drought Monitor in Lincoln, Neb., began tracking the data in 2000.
In the seven days ended July 6, temperatures in the region averaged as much as 15 degrees above normal.
Soil moisture in Ohio, Illinois, Indiana, Missouri, and Kentucky is so low that it ranks in the 10th percentile among all other years since 1895.
Weather forecasts on Monday for the U.S. Corn Belt, which stretches from Nebraska to Ohio, were grim.
Temperatures have moderated from a peak of triple-digit heat in recent days, but in many stressed areas, rainfall is nowhere on the horizon.
Even where some rainfall has been predicted, it is not expected to help and some farmers on the southern tier of the Corn Belt already have plowed up withered corn into silage, a cheap feed.