Drought Causing Food Prices to Rise

Food prices are expected to surge after the worst drought in the U.S. for half a century destroyed one-sixth of the country's expected corn crop over the past month.

The hottest July in U.S. history has caused irreparable damage to crops, forcing corn farmers to abandon fields greater in area than Belgium and Luxembourg.

Soyabeans, which are used for animal feed and to make vegetable oil, have also been affected, with this harvest likely to be the worst for five years.

The crisis has prompted the US Department of Agriculture (USDA) to forecast record-breaking price rises, and some of the world's largest food manufacturers, including Kraft, Tyson and Nestle, have already indicated that they will pass on the increase to consumers.

USDA now expects 10.8billion bushels of corn to be produced this year - 2.2billion bushels less than the projection it made last month.

USDA chief economist Joseph Glauber told the Financial Times: 'We're going to see very high prices.'

The problem could have far-reaching consequences internationally.

In 2007-08, high food costs led to riots in more than 30 countries, but Jose Graziano da Silva, the director general of the UN's Food and Agriculture Organisation, said the current crisis was not as severe.

'We do not have the demand pressure from China and India as five years ago.'

(Full story here).