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Alarms sound over world food supply as drought wilts US Corn Belt

The US government on Friday slashed estimates for global food supply as a deepening drought withers corn and soybean crops in America's heartland. 'Scary situation,' one analyst says.

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"This is not some gentle monthly wake-up call,” Oxfam spokesman Colin Roche told the press after the latest figures were released. “It's the same global alarm that's been screaming at us since 2008. These new figures prove that the world's food system cannot cope on crumbling foundations. The combination of rising prices and expected low reserves means the world is facing a double danger."

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A May report from the National Intelligence Council, an adviser to the federal government, suggested that countries that depend on food imports – Pakistan, Bangladesh, Sudan, South Sudan, and Egypt, to name a few – are vulnerable to social unrest should food prices rise too high.

In the previous world food shortage, some 60 food riots erupted across the globe, the US State Department has reported.

The drought is serving to highlight the importance, and vulnerability, of the US Corn Belt as it relates to global food supply. More specifically, the situation has focused new criticism on US ethanol production mandates, which require that 40 percent of an already-poor crop go toward refining the coarse grain into car fuel. The mandates were put in place over the past decade to help cut greenhouse-gas emissions and to make the US more energy-independent. So far, President Obama has said he’s not considering waiving the mandate.

“An immediate, temporary suspension of that [ethanol] mandate would give some respite to the market and allow more of the crop to be channeled toward food and feed uses,” José Graziano da Silva, director general of the UN’s Food and Agriculture Organization (FAO), wrote recently in the London Financial Times.

Government economists expect corn prices to rise to a record $9 a bushel, up from a $6 bushel estimate in early July. But private ag economists suggest that the drought is worse than advertised and that prices could go even higher.

Extrapolating from price peaks set in 1973, a year when corn and soybean supply was about as tight as it is today, and adding current demands, Terry Roggensack of the Hightower Report concluded that corn prices could go as high as $17 a bushel and soybean prices could top $50 a bushel.

Such prices could make some farmers and commodity traders wealthy, but they could be devastating for poorer, food-importing nations. “The U.S. leads the world in exporting corn, soybeans and wheat, and the surging prices are expected to be felt across the international marketplace, hurting poor food-importing countries,” said a study by British charity Oxfam issued ahead of this week’s UN report.

However, the FAO did note that its overall food price index for July remains well below the peak reached in February 2011, suggesting that countervailing forces – including lower beef prices – may yet stave off a repeat of the 2007-08 global food shortage.

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