AS the worst U.S. drought in more than half a century pushes Chicago Board of Trade (CBOT) grain prices to new highs, Asian buyers may be forced to spend significantly higher on their food imports for rest of the year and beyond.

    CBOT grain futures hit new all-time highs last week with corn rising above US$8/bushel and soybean moving above US$17/bushel. Wheat is at a four-year high above US$9/bushel with no sign yet that the rally will be over any time soon as dry weather conditions continue.

    Around 80 percent of the United States is facing varying degrees of drought, said Jay O’Neil, a senior agricultural economist with Kansas State University.

    The United States is the world’s top exporter of grains, shipping millions of tons each year to East Asian markets such as China, Japan, South Korea and Indonesia. Significantly, the fear of further upside is forcing buyers into the market despite the recent gains in prices.

    Taiwan, for example, bought U.S. wheat Thursday at prices that were more than US$70/ton higher than just a month ago. With East Asia importing at least 30 million tons of wheat a year, a US$100/ton increase in prices could translate into an increase of US$3 billion in the region’s annual import bill.

    Similar cost escalations are taking place in corn and soybean as inventory levels fall across the board. CBOT corn futures are up 48 percent in the last six weeks while soybean futures have risen 33 percent in the same period.

    China could be the worst hit by the crisis as it is the world’s biggest importer of soybeans. China may import almost 60 million tons of soybeans in the year starting October 1, accounting for close to 60 percent of the global trade next year. Japan and South Korea are among the world’s top corn importers with China fast catching up.

    High prices of feed material such as corn and soybeans will certainly hurt the livestock sector, pushing up prices through the entire food chain and consumers being forced to pay more for their meals, Abdolreza Abbassian, a Rome-based senior economist with United Nations’ Food and Agriculture Organization said. (SD-Agencies)