=,,-l~.=.tJIo FINANCIAL Tn\1[E~~ 158 _BU_S_IN_ES_S_D_A_Y_'_w_w_w_ob_"_,_in_e_'_,_d_ay_o_n_l_in_e_oc_o_m ________________ ____________ .,;;.M:.:o::.n:.:d::a~y_· 3!August 2012
US drought threatens food price
suril~e
GREGORY MEYER IN NEW YORK AND JACK FARCHY & JAVIER BLAS IN LONDON
T
he worst drought In the US in at least half a
cenrwy has desrroyed
one-sixth of the country's expected co rn cropovc:rthe past month, thre°alenlng a surge In global food Inflation.
The US government estimated corn farmers had abandoned fields greater in area than Belgium and Luxembourg after the hottest July in US hlslory irreparably damaged their crops. The harvesl for soya beans, largely crushed into animal feed and vegetable oil, would be the lowest In five yean.. 1l1e US Depamneot of Agriculture forecast prices for the two crops would break records, with domestic com averaging between S7.50 and 58.90 per bushel after this yeu's harvest Starts. On the Chicago Board of Trade, com futures Jumped 3. 1 per cent yesterday to an all-time high of SS.43\4 before slipping. · We' re going to see very high prices; said Joseph Glauber, USDA chief economist. The failure of the US com cro p \vlU hi! the world's food manufacturers, includlngNesde, Kraft and Tyson, who have already warned that they will pass on higher prices to consumers.. The surge in prices has revived memories of the 2007-08 food crisis, when the high cost ofrood triggered nots In more than 30 countries from Bangladesh to Haiti. The department's estimated com crop of iO.Bbn bushels was 2.2bn bushels less than its July
us Seaetary ol~ HllIary Rodham QinIDn(~l greel5 Koti Annan and his wifu Nan!! Lagergrm aI \he fun~ of Ghana's La!!! Presldcn.l fohn Ana Mill$, In Al a3, Gl \afQ
projection . The US is the tOp producer and exporter of the world's most heavily grown grain, 50 the shortfall has heightened concerns about the slabllity of world food supplies. Com is mainly used to feed animals and produce US ethanol fuel. Eyeing low supplies, the USDA forecast shaIply lower consumption and eIpons, with
the meat Indusuyhlt the hardest. Domestic red meat and p oultry supplies will decline next year, the department said. "To reduce demand like the USDA has implied, we will need to set: com prices [n excess of $8 a bushel; said Chris Gadd, grains analyst at Macquarie. Ahead of the release, Tom Vllsack. US agriculture secretary,
"""'~ raq has overtaken Iran as the second-largest Opt.:1: oil producer for the first time since the late 198Os, a symbolic shift that signals the huge impact of western sanctions on Tehr.m and the steady recovery of Baghdad's energy Industry. The International Energy Agency, the western ooumries' oU watchdOg. said yesterday that last month Iraq produced more than 3m barrels a day, the highest since the US-led invasion nearly a decade ago.At the same rime, Iranian 011 output fell below the 3m bi d level for the first time in more than 2Oycar.;, dropping to 29m bi d in July. Last month was the first that saw the combined impact of US sanctions against Tehr.tn, a full EU embargo on the country's crude exportS and a de facto global ban on maritime insurance for Il"iInlan all $upenankers. "The different [pro-
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ductionJ pathsshowthe huge impact of politics in oil and the Middle East," ManoudlehrTaldn. an oU ana}ysl at the Centre for Global Energy StudIes, said Indusuyexecutives, analysts and policymakerssald that althoughIraq had made strong progress boosting its output, the drop in Iranian production was the main factor behind theswilch in Ibe production ranldng. Over the past five yean Iranian oil production has faUen roughly 1m bId because of the Impact of several rounds of sanctions and underinvestment, while Iraqi ourput has surged 800,000 bId. 1he gap is likely to widen as Iraq oontinues to rebuild itshydrocatbon Industry with the help of blilions of dollan In investments from foreign oil oompanies and Iran faces western sanctions over its nuclear programme. Baghdad signed long- tenn oonttacts belW'een late 2008 and early 2010 with oil groups induding EnonMobil. Royal Dutch Shell. BP, Total
Food and Agrlc .lltur.! Organisation, told thf l'ina llciai Times t.l}e siluation.v IS nct as had as in 2007-08. ·We do nOI havt- ttle demand p ressure £Ton. China and India as five yean a:;c,- h e ~d. Stocks o f rice and w _wat re main high, though the USDAcutilS estimate o f the. Russian v. hem crop due to heat and dry soi ls..
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Borrowers set for more protection
Iraqi oil output overtakes Iran's as sanctions hit home JAVIER8lAS
cautioned that the ttue supply picrure would only emerge later this year. "In the past. estimates h ave been off in dro ught years. We have to be cogniSBnt of that fact," he told the Flnandalllmes on Thursday. Policy make rs a re increasIngly alarmed by the food supply siruation. But lose Graziano da Silva, director-general of the UN's
AFP
ROBIN HARDING W~!ihlng too
ot"France,lukoliofRussiaandCNPC ofOUna to develop a dozen giganric fields in the country's SOUIh, indudingsomeofthe world's largesl, such as Rumaila and West Qurna Iraq has sel an ambitious target of pumping 12m b Id by 2017, but officials and industry execudvt.:S be-Iievt: It would achieve only a fraction ofthatlevt:L Ibe most likely scenario Is that production rises from 3m bId now to about 4.0-4.Sm bI d; said Mr Takln, a geologist by [raining and fanner official at Opec, echoIng a view widely held by oU oompanie:s investing In 111Iq. Gati al-Jebouri. the head of Lukoil in the Middle East, last yea r suggest:ed a target of about 5m bId, but cautioned that depended on pipeline infrastructure..
In addition, big oil companies such as Gl!.2prom ofRus.sia and OJevron of the US have also signed deals .wlth the semi-autonomous region of Kwdistan in northern lraq to tap smaller; butluaative, ollfie1ds there.
s regulator has proposed new rules on motTgage servicing thai could rompt big banks to quil the business of collecling loan payment.s. The Consumer Finandal Protection Bureau - a new agency created after the financial crisis - set out two new rules requiring servicers to c.ommunicate clearly with borrowers and resolve errors promptly. · These proposed rules would offer consumers basic protections and pUI the 'service' baele into mongage serviclng." said Richard Cordray, the directoroftheCFPB. The new rules may heip some borrowers to escape foreclosure by prOviding bener information but also hasten a trend in the industry towards specialist mongage service companies.. In the Us, banks often sell mOrlgages to federal agencies Fan nie Mae and Freddie Mac, whIch repackage them Into mOrfgagebacked securities. The servlcer's
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Jo b is to colle< t .he monlhly payment.s and send statements to the borrower. The bank Ihilt made the loan may act as servic!ro r it can sell the right [0 do so tn l.nother company. Servicers have Clime under fire for blocking mong~@ e modifications or foreclOSing on hll US<!S without the correct docum ~ r tation. Ibe made'll ale perfonnance of many mon gllge servicers has helped widen Ih,~ mi..sCry for many Americans,"sai:lMrCordr.ly. "Right now, people ha 'i e 100 little protecdon under frdernl law If their mongage serv:D!J surprises th em wi th costly ret!~ Jr l ives them the rWlaround.The first new h.lle requlRSmon-
gage s ervicers ro provide clear monthly statern OiLS give ....-aming of Interest rat.: HdJusnnems, and inform delinqu,:nt borrowers of their options ". avoid foreclosure. The second "n :J-nmaround- rule is supposed to Sl ()p .service15 from using bw:eauc:r.ICY against their customers by Il :qulriog prompt c rediting of pal'menu, accurate rt.:1:ords and sl'e<!dy correction of any errors on lin 1a:ouJ1t.