Heat Wave, Drought Visably Impacting Nation’s Corn Supply

Heat Wave, Drought Visably Impacting Nation’s Corn Supply

Corn fieldCorn supplies in the U.S. are declining at the fastest pace since 1996 as a Midwest heat wave damages the world’s largest harvest for a third consecutive year.

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Bloomberg News reports that stockpiles were probably 3.168 billion bushels (80.47 million metric tons) on June 1, 47% less than on March 1, the average of 22 analyst estimates show. The worst Midwest drought in more than a decade is wilting a harvest that the USDA says will be the biggest ever. The agency updates its inventory estimate June 29 and its production forecast two weeks later.

Futures surged 25% since reaching a 20-month low June 15, and Morgan Stanley expects prices to advance another 10% to $7 a bushel in two months if the drought persists. The rally is boosting global food costs that the United Nations estimates dropped 14% from a record in February 2011 and widening losses for ethanol producers including Decatur, IL-based Archer Daniels Midland Co.

Meanwhile, corn rallied 14% this month to $6.3375 a bushel on the Chicago Board of Trade on Wedneday, trailing only wheat and natural gas among 24 commodities in the Standard & Poor’s GSCI Spot Index, which fell 3.7%. The MSCI All-Country World Index of equities rose 1.3%, and the dollar fell 0.8% against a basket of six currencies. Treasuries lost 0.2%, a Bank of America Corp. index shows.

The USDA forecast June 12 that pre-harvest stockpiles at the end of August would plunge to a 16-year low of 21.62 million tons. That’s a 50% decline in two years, the most since 1990.

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