Another Food Price Spike?

At the time of writing (August 2012) the worst drought in half a century is occurring in the US Corn Belt, despite high harvests having been predicted as little as two months ago. As an article in the Financial Times documented, 9 out of 10 acres of maize and soybean land is suffering drought and half of the maize harvest and a third of the soybean harvest are being categorised as poor to very poor.

Given that the US is the largest exporter of agricultural commodities, exporting 40% of the world’s maize and soybean crop last year, the impact on food prices is felt globally. Another increase in prices may lead to the same panic buying and export restrictions seen during the 2010 Russian heatwave and consequent cereal shortage.