Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Top Business Stories

Worst U.S. drought in half a century sets stage for spike in food prices Add to ...

These are stories Report on Business is following Thursday, July 19, 2012.

Follow Michael Babad and the Globe’s top business stories on Twitter.

Drought drives up prices
The crippling drought in the United States is driving grain prices ever higher, paving the way for higher food prices and igniting fears of a replay of the crisis of a few years ago.

"The situation has gone from tranquil a few weeks ago to relatively worrying,” Abdolreza Abbassian, an economist in Rome at the United Nations Food and Agriculture Organization, told Bloomberg News. "Now the situation is getting to be pretty critical. Obviously it’s not going to be a relaxing summer."

Prices for corn and soybeans, in particular, are hitting record highs, and, Reuters reports today, some suppliers are defaulting on sales already arranged because those contracts would now come at a loss given the price spike. Wheat and rice, however, are not wildly out of whack, which could stave off a repeat of the 2008 price crisis.

"Commodity prices are strong and the grains are leading the way higher as the drought continues," said Dennis Gartman, publisher of the Gartman Letter.

"As we write, nearly 'old crop' September corn futures are moving upward through the psychologically important $8/bushel area."

It's the most severe drought in more than half a century. Some 1,300 counties are now pegged as disaster areas, and more than 75 per cent of the U.S. corn and soybean crops are in the regions hit by the drought.

Observers are holding out hope for rain today in the eastern corn belt.

Tom Vilsack, the U.S. agriculture secretary, says the drought will probably lead to higher food prices, but that will take some time.

"I get on my knees every day and I’m saying an extra prayer right now," Mr. Vilsack said.

The U.S. government believes that only about 30 per cent of the nation's corn crop is in good shape.

Microsoft posts first loss
Microsoft Corp. today posted its first quarterly loss as a public company, taking a previously announced hit.

The software giant lost $492-million (U.S.) or 6 cents a share in its fourth quarter, compared to a profit of $5.9-billion or 69 cents a year earlier.

Revenue climbed to $18.1-billion from $17.4-billion.

The loss included a hit of $6.2-billion on its acquisition several years ago of the online advertising unit aQuantive.

Microsoft shares gained in after-hours trading as chief executive officer Steve Ballmer delivered an upbeat message.

“We delivered record fourth quarter and annual revenue, and we’re fast approaching the most exciting launch season in Microsoft history,” Mr. Ballmer said. “Over the coming year, we’ll release the next versions of Windows, Office, Windows Server, Windows Phone, and many other products and services that will drive our business forward and provide unprecedented opportunity to our customers and partners.”

Committee urges shipping oil east
The Senate’s Conservative-led energy committee is throwing its support behind efforts to ship western oil east to be refined in Ontario and Quebec, The Globe and Mail's Bill Curry reports.

Acknowledging Canada has so far failed to secure public support for shipping oil sands oil south to the United States and a new pipeline to the Pacific remains controversial, the committee’s Conservative chair David Angus says looking east is a “no brainer.”

Euro crisis back in spotlight
The euro crisis is rearing its ugly head again.

A Spanish bond auction went poorly today, with borrowing costs surging, after troubles arose in Italy with Sicily on the brink of bankruptcy.

"Once again we appear to be at just such a critical stage with concerns about an escalation in the crisis coming from Italy with respect to the solvency of Sicily, where the region is said to be due to run out of money any day now," said senior analyst Michael Hewson of CMC Markets.

"These concerns have prompted fears that if Sicily goes bankrupt the contagion could well spread to other regions in Italy and escalate Italy’s borrowing costs even higher. Italy is also due to vote on the [bailout fund] today," he said in a research note.

Nexen profit slumps
Canada's Nexen Inc. posted a hefty drop in second-quarter profit today, stung by lower oil prices.

Nexen earned $109-million or 20 cents a share, down from $252-million 48 cents. Revenue climbed to almost $1.7-billion from $1.5-billion.

Nexen is still searching for a new chief after the departure of Marvin Romanow early this year.

Business Ticker

 

 

In the know

Most popular videos »

Highlights

More from The Globe and Mail

Most popular