Corn is due for more damage from a drought that has produced the worst U.S. growing conditions in almost a quarter century, according to David Driscoll, a Citigroup Inc. analyst.
The CHART OF THE DAY displays the percentage of the corn crop in good to excellent condition, according to data compiled by the Agriculture Department. Average readings for the previous 25 years and data for 1988, another drought year, are included for comparison.
Only 31 percent of this year’s crop was good or excellent last week, the USDA data showed. The figure was lower than the 38 percent rated as poor or very poor.
“Above-average temperatures and below-average rainfall will likely persist,” Driscoll wrote two days ago in a report citing weather forecasts for the Midwest, where most U.S. corn is produced. “This would worsen the corn situation.”
Archer-Daniels-Midland Co. (ADM) is at risk, he wrote, because higher corn prices tied to the drought will make the company’s ethanol production more costly. Driscoll cut his rating on the Decatur, Illinois-based company to neutral from buy on July 1.
The effect on packaged-food producers will depend on the extent of damage to soybeans as well as corn, the report said. Although this will be clearer at the end of August, he wrote, current crop prices point to “a manageable situation.”
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