Midwest drought shows little sign of abating

Tue Jul 17, 2012 10:35pm BST

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(Reuters) - Broiling heat blanketed much of the Midwest on Tuesday, exacerbating the region's worst drought in more than 50 years and devastating corn, soy and other vital crops.

From Chicago to St. Louis to Omaha, Nebraska, temperatures eclipsed 100 degrees Fahrenheit and the National Weather Service (NWS) issued heat advisories across Midwest and mid-Atlantic states.

Many of the NWS heat advisories don't expire until next week. Temperatures in Kansas City, Kansas for instance, are expected to hit 104 degrees Fahrenheit (40 degrees Celsius) on Wednesday.

The current drought is the worst since 1956, the National Oceanic and Atmospheric Administration said in a report posted on its website.

In Iowa, Gov. Terry Branstad convened a hearing to discuss the drought and its effect on the state's pork industry, which relies heavily on corn feed.

"It's important that we do all we can to help people through this difficult time," Branstad told local radio station KILJ. "And obviously more rain would help."

About 55 percent of the contiguous United States is in a drought, just as corn plants should be pollinating, a period when adequate moisture is crucial. The United States ships more than half of all world exports of corn, which is made into dozens of products, from starch and ethanol to livestock feed.

"We're moving from a crisis to a horror story," said Purdue University agronomist Tony Vyn. "I see an increasing number of fields that will produce zero grain."

The soonest rain is expected in the Midwest is the middle of next week, said Jason Nicholls, meteorologist for AccuWeather.

The new forecast calls for rains of 0.2 to 0.7 inch around the region, up from earlier outlooks of 0.1 to 0.6 inch.

The dry weather and intense heat likely will continue through August, further damaging the corn crop, AccuWeather said.

Corn prices are at 13-month highs and have surged 45 percent this summer, with analysts expecting the crop to deteriorate further as the drought lingers.

The U.S. Department of Agriculture (USDA), in its weekly crop progress report on Monday, said just 31 percent of the corn crop was in good to excellent shape, down from 40 percent a week earlier and below analysts' average estimate of 35 percent.

Soybean conditions fell to 34 percent from 40 percent in the good to excellent category, below estimates for 35 percent.

"We need soaking rains now. We need two-to-three-inches and that's not in the forecast," AgResource Co analyst Dan Basse said.

EFFECT ON FOOD PRICES

In April concern mounted that near-record spring corn plantings would sharply increase supply and push corn prices below $5 per bushel.

Now, because of the drought, corn prices are flirting with $8 per bushel, and that could boost food prices.

With much of the Midwest pasture laid waste by the drought and ranchers facing climbing feed costs, many ranchers have begun liquidating their herds, which could translate into higher prices for meat next year.

"Based on my conversations with producers, I would say 75 percent of the corn crop in the heart of the drought is beyond help," said grains analyst Mike Zuzolo, president of Global Commodity Analytics & Consulting in Lafayette, Indiana.

Weather problems were also reported in Eastern Europe and Asia, mirroring drought that dented Argentina and Brazil's last harvest.

Black Sea grain producer Kazakhstan was preparing for a below-average crop this year due to an "alarming" drought in the country's main growing regions.

The United Nations food agency said earlier this month that the U.S. drought was expected to see global food prices snap three months of declines in its July figures.

The drought is even harming equipment makers. Shares of Deere & Co, the world's largest maker of tractors and combines, fell on Tuesday after a JPMorgan analyst said the U.S. drought was likely to harm sales in 2013.

Despite what little precipitation may come in the next few days, arid and hot conditions will stick around for the next few weeks, said Commodity Weather Group (CWG).

"Showers may scatter into the south and east Midwest, but relief for the belt as a whole would still be limited," said CWG meteorologist Joel Widenor.

(Reporting by Sam Nelson, Andrew Stern and K.T. Arasu in Chicago, Ernest Scheyder in New York; Editing by Leslie Gevirtz)

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