Corn Jumps to Record as Floods in Midwest Threaten U.S. Crops

By Jae Hur and Jeff Wilson

June 16 (Bloomberg) -- Corn climbed to a record approaching $8 a bushel after storms pounded crops in the U.S., the largest producer and exporter, and caused what may be the worst flooding in the Midwest since 1993.

The flooding probably will reduce U.S. planted acreage by more than 3.3 million acres, or 3.8 percent of the total forecast by the government, according to a Farm Futures magazine call-in poll of 584 growers last week. The U.S. Department of Agriculture will update its weekly crop-conditions report after the close of trading today.

Corn rose as much as 3.5 percent as Midwest floods probably will cause ``hundreds of millions of dollars'' of damage, according to the National Weather Service. U.S. inventories may fall 53 percent to a 13-year low before next year's harvest, the USDA said June 10.

High food prices ``are here to stay'' as governments divert resources to make biofuels, amass stockpiles and limit exports, Peter Brabeck-Letmathe, chairman of Nestle SA, the world's largest food company, said today in an interview in Kuala Lumpur.

Corn futures for December delivery were unchanged at $7.65 a bushel on the Chicago Board of Trade. Earlier, the price rose to a record $7.915, climbing to an all-time high for the eighth straight session. The price has gained 16 percent in the past five sessions and 83 percent in the past year on soaring demand for biofuels and livestock feed.

Crop Insurers

Rains in Iowa and Illinois that have left farms underwater will lead to losses for crop insurers including Wells Fargo & Co., Ace Ltd. and Deere & Co., an industry group said.

Wells Fargo's Rural Community Insurance Services unit has had 6,000 loss notices from farmers because of the flooding, triple the amount from a year earlier, according to National Crop Insurance Services, a non-profit organization in Overland Park, Kansas.

Most policyholders of Rain & Hail LLC, an Ace affiliate, will have a loss, the group said today in an e-mail, citing preliminary figures from the companies.

The United Nations estimated global food imports will exceed $1 trillion for the first time this year. In Egypt, the most populous nation in the Middle East, bread subsidies account for 5.5 percent of the national budget.

Mexico, Yemen and 31 other nations face social unrest because of soaring food and energy costs, the World Bank says. Argentina's crop exports have been disrupted by farmer and trucker protests since March.

`Serious Challenge'

``Elevated commodity prices, especially of oil and food, pose a serious challenge to stable growth worldwide, have serious implications for the most vulnerable and may increase global inflationary pressure,'' finance ministers from the Group of Eight nations said in a statement after a June 14 meeting in Osaka, Japan.

United Nations Secretary-General Ban Ki-moon has called for a 50 percent increase in food output by 2030, saying failure to feed the world's growing population will spark civil unrest and starvation. A 60 percent gain in food prices since the start of 2007 has spurred riots in more than 30 countries.

Consumer prices last month probably rose the most since 1997 in the U.K. and the fastest in 16 years in the 15-nation euro area, while U.S. producer prices are predicted to have gained 1 percent from April, according to forecasts by economists. Global food prices have jumped 51 percent in the past year, according to the UN's Food and Agriculture Organization.

Crude oil has almost doubled in the past year. The price rose to a record $139.89 a barrel today.

`Inflation Building'

``Inflation pressures are building around the world,'' stoked by food and fuel prices, said David Cohen, director of Asian economic forecasting at Action Economics in Singapore. That is ``squeezing household budgets, especially the poorest, and company profits,'' he said.

Parts of the Midwest may receive as much as 2 inches (5.1 centimeters) of rain in the next five days, according to the National Weather Service. Temperatures will average below normal in the next week, slowing the drying of saturated fields, government data show.

As much as 14 inches of rain fell in the Midwest in the past two weeks, and some fields had as much as five times the normal amount of rain since June 2.

Almost 16 percent of the respondents in the Farm Futures survey said they will plant less than 80 percent of the corn acres they intended this year, which already had been expected to decline. A USDA survey in March showed farmers intended to plant 86 million acres, down 8.1 percent from last year's record.

Argentine Protests

Argentine farmers intensified protests against higher export taxes after a farm leader was arrested by police, threatening to spark food shortages and halt the flow of grains in the country. Farmers began their fourth strike in three months yesterday, withholding crops and blocking roads.

The country is the world's third-largest soybean exporter, behind the U.S. and Brazil, and second to the U.S. for corn.

Corn is the biggest U.S. crop, valued at $52.1 billion in 2007, followed by soybeans at $26.8 billion, government figures show.

To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net; Jeff Wilson in Chicago at jwilson29@bloomberg.net