Corn prices soared toward new highs on Monday amid growing fears that the drought scorching the U.S. Midwest will prove to be the harshest in decades. The hot, dry weather could cut the U.S. harvest this autumn by more than 1 billion bushels below the federal government’s forecast of two months ago, leaving domestic supplies relatively tight, analysts say.
Corn futures for July delivery jumped 4% to $7.7525 a bushel on the Chicago Board of Trade, extending gains to 29% in the past three weeks, as intense heat and a dearth of rainfall punish parts of big corn-growing states like Illinois, Indiana, Iowa and Ohio. Corn prices are just cents away from the nominal record $7.9975 a bushel reached in June 2011, when prices were rising because of worries about flood damage.
A higher cost of corn likely would drive up the cost of feed for livestock producers, which could lead in turn to higher meat prices, and also spill into the prices consumers pay for cereal, sodas and other packaged foods. Rising corn prices already are squeezing profits for U.S. ethanol companies.