* U.S. drought worsens, crop ratings drop sharply
* Corn, soybean prices near record, food inflation fears
* Heat dome over Corn Belt to continue, forecasters say
By Andrew Stern
CHICAGO, July 16 Corn and soybeans in the U.S.
Midwest baked in an unrelenting heat wave on Monday with fears
rising of big crop losses that will boost food and fuel prices
and cut exports and aid from the world's top shipper of the key
The condition of the nation's corn and soybeans as of Sunday
deteriorated even more than grain traders had feared, and the
U.S. Agriculture Department cuts its weekly corn crop condition
rating by the biggest amount in nearly a decade.
After weeks of growing drought some lucky farms have been
doused by scattered thunderstorms in the past few days. But
weather forecasters warned the heat and dryness would only
intensify through the end of July and possibly beyond.
"We're moving from a crisis to a horror story," said Purdue
University agronomist Tony Vyn. "I see an increasing number of
fields that will produce zero grain."
The drought scorching the U.S. Midwest is the worst since
1956, the National Oceanic and Atmospheric Administration said
in a report posted on its website on Monday. Drought is
affecting 55 percent of the land mass in the lower 48 states.
The corn crop is in the greatest danger. Plants are trying
to pollinate to let ears fill with kernels, a period when
adequate moisture is vital for final yields. The United States
ships more than half of all world exports of corn, which is made
into dozens of products, from starch and ethanol to livestock
The USDA on Monday rated the corn crop - which had once been
estimated to total a record 14 billion bushels this year - at
only 31 percent good-to-excellent, down 9 percentage points on
The soybean crop rating was cut to 34 percent
good-to-excellent, down 6 percentage points from the previous
Chicago Board of Trade corn for December delivery has
soared 54 percent since mid-June, reaching a contract high of
$7.78 on Monday and approaching its record price near $8.
Soybeans for November delivery soared to a new
contract high of $15.97 before slipping back a few cents.
Crop watchers were alarmed that corn rated poor-to-very poor
jumped to 38 percent, versus 30 percent last week and 11 percent
a year ago.
"They're moving corn from good-and-excellent condition to
poor-to-very poor in one week, which skips fair condition. What
they're saying is it's a lot worse than they thought," said
farmer Larry Winger, who farms along the Illinois-Indiana border
30 miles (48 km) south of Purdue, commenting on the USDA report.
To make matters worse, Winger said, drought has created ripe
conditions for spider mites, which suck the moisture out of
soybeans and can slice yields in half. Japanese beetles and
other pests were feeding on Midwest corn, which can also develop
toxic fungal diseases in drought years, analysts said.
Both grains are exported around the world, raising concerns
about global food shortages and inflation. The impact on
American grocery and meat case prices may take time to be felt
but will likely be seen in inflation in coming months.
Last week, U.S. Agriculture Secretary Tom Vilsack designated
more than 1,000 counties across the country as natural disaster
areas due to the drought conditions, the largest single
designation in the history of the USDA loan aid program.
In Nebraska, where most farmers irrigate their corn, flows
in streams and rivers had dropped so much that the state on
Monday asked 1,100 of Nebraska's 48,000 farmers and ranchers to
stop pulling water from the waterways and use wells instead.
Iowa and Illinois produce a third of U.S. corn and soybeans.
But prospects there have turned down sharply, raising fears
losses will be the worst since 1988, the last major drought.
Prospects for the later-developing Midwest soybean crop were
better than that for corn, though substantial rains were needed
during the next three weeks to salvage Indiana's crop, Vyn said.
"The window for soybeans is closing," he said.
Soybeans usually go through their key growth period of
flowering and pod-setting in August, a few weeks after corn in
the Midwest. Soy is used in scores of products, from paints and
feeds to edible oils and increasingly for soy-based diesel fuel.
"We need soaking rains now. We need 2 to 3 inches and that's
not in the forecast," AgResource Co analyst Dan Basse said.
AccuWeather meteorologist Erik Pindrock said a seemingly
immovable ridge of high pressure on Monday kept much of the
central Corn Belt in a dome of heat, and he predicted the hot,
dry weather would persist through July and possibly into August.
Monday's heat matched high temperature records for the date
in many locations including Flint, Michigan, where it was 97
Fahrenheit (37 Celsius), and in Indianapolis, where it was 98 F,
"We've seen Raleigh, North Carolina, tie its all-time record
of 105 (F) degrees three times ... so this is definitely a
country-wide heat wave," Pindrock said.
(Additional reporting by Kay Henderson in Des Moines, Karl
Plume and Michael Hirtzer in Chicago; Editing by Peter Bohan and