By Lester R. Brown
Over the last two months, the price of corn has been climbing. On July 19th, it exceeded $8 per bushel for the first time, taking the world into a new food price terrain.
This is not the way it was supposed to be. This spring, farmers planted a record 96 million acres of corn. An early spring got the crop off to a great start, leading the U.S. Department of Agriculture (USDA) to project the largest corn harvest in history.
On June 12th, the USDA projected the U.S. harvest would hit a record 376 million tons. But the drought conditions that had initially been confined to the country's southwest began to spread and intensify. In its next monthly report on July 11th, the USDA reduced its projection to 329 million tons of corn, down by 12 percent or 47 million tons. This was a huge drop in only one month. Yet in the end the actual decline may be closer to 30 percent, or roughly 100 million tons—double the USDA estimated drop. (See data.)
Because the USDA is overestimating the harvest, it is underestimating the food price rise in the months ahead. Even as corn prices are setting all-time highs, so too are soybean prices, putting still more upward pressure on food prices.