Corn prices hit new highs this week after the US Department of Agriculture forecast that output would fall because of poor weather. Corn reached a record price of above 7 US dollars a bushel for July delivery on the Chicago Board of Trade after the government cut its forecasts for the 2008 yield by 3%.
Crops have been hard hit by torrential rains and flooding across the US Midwest corn belt. To exacerbate the problem, demand for corn for both food and fuel has been increasing worldwide. The US Department of Agriculture also reduced its forecast for corn supplies running to 31 August 2009 to its lowest in more than a decade, at 673 million bushels or three weeks' worth of supply. As well as bad weather, growing demand for corn worldwide to feed animals and make bio-fuels has pushed up prices. As oil prices rise, using corn in bio-fuels as an alternative to fossil fuels becomes more attractive, and this has helped to raise the price of corn from about 4 dollars a bushel a year ago to its current record levels. Prospects of continued wet weather in the Midwest have dashed hopes that a bumper crop might allow inventories to rebound after sagging to their lowest level in decades.