Drought taking toll on corn crops, and prices

(CBS/AP) ST. LOUIS - The drought affecting America's Midwest continues to take its toll, as the Agriculture Department said Friday U.S. corn growers could end up with their lowest average yield in 17 years.

The USDA is slashing its projected U.S. corn production forecast for the year to 10.8 billion bushels, down from its forecast last month of nearly 13 billion bushels - and a dramatic 13 percent decrease from 2011, with average yields projected to be at their lowest since 1995.

Soybean production is also forecast down 12 percent from last year.

Drought conditions in parts of the U.S. - the world's number one exporter of corn, soybeans and wheat - are causing food prices to rise around the world. CBS News MoneyWatch correspondent Ines Ferre said the U.N. index that tracks international food prices shows corn prices up nearly 23 percent in July.

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The surge in corn prices in the U.S. is leading to soaring feed prices - which means growing costs for ranchers raising cattle.

"Right now corn is at an all-time high," said Dr. George Beele, East Texas Livestock Adviser. As a result, "we probably sold 30 to 40 percent of our herds. People have culled, culled, culled, and a lot of them have completely sold out."

Cows are limited in number due to a record culling of Texas cows last year, also due to drought and lack of feed.

But livestock dealers selling that cattle are making hefty profits as the price of beef goes up, too. At the East Texas Livestock Auction, they're receiving a pretty penny for their cows, with prices up between 40 to 50 percent compared to last year.

Beef prices, the USDA says, are already up about 15 percent from two years ago and may jump another five percent next year.

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According to the USDA's World Agricultural Supply and Demand Estimates report released Friday, the large reduction in U.S. corn supplies and the sharply higher price outlook are expected to further reduce the use of corn in 2012-13 for food, livestock feed, and industrial purposes, such as ethanol.

Wheat production has increased slightly, as global wheat consumption in 2012-13 appears on the rise, as a number of countries are expected to shift some of their livestock and poultry feeding from corn to wheat.

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