UN Fears American Drought Will Push Food Prices Up

By CnAgri2012-07-06 13:30:00 Print

Searing heat in the U.S. is expected to see global food prices snap three months of declines in July, the UN said on Thursday, as some international grain prices surged to highs last seen during the 2007-08 food crisis. According to Reuters, concerns about extreme hot and dry weather hitting U.S. corn and soybeans ignited a grain rally in the second part of June and a series of crop quality downgrades by the U.S. Department of Agriculture has added fuel to the rally which brought Chicago corn futures to a 10-month high this week.

"We do not rule out further price increases and more price volatility until U.S. harvests. The next couple of months are going to be quite bumpy," the UN Food and Agriculture Organisation's (FAO) senior economist and grain analyst Abdolreza Abbassian told Reuters as the body published its June food price index.

Soybean prices jumped to their highest levels since 2008 while U.S. wheat hit its highest price in over a year, tracing corn's rally.

Food security last grabbed the attention of world leaders after record high food prices in February 2011 contributed to the protests known as the Arab Spring in the Middle East and North Africa last year.

The FAO slashed its 2012 world cereals output forecast to 2.396 billion tonnes, 23 million tonnes down from a previous estimate, driven by a 25-million tonne cut in its view of the U.S. corn production to 350 million tonnes.

The agency also cut its estimate of the closely watched global grain stocks for crop seasons ending in 2013 to 536 million tonnes, down 12 million tonnes from the previous forecast but still 4 percent higher than their opening levels.