An ear of corn in Indiana shows drought damage. (Michael Conroy/Associated…)
The punishing Midwest drought is expected to reduce the nation's corn crop to its lowest level in almost two decades.
On Friday, the U.S. Department of Agriculture cut its estimate for the corn crop by nearly 17% and raised the upper end of its price forecast by 39% to almost $9 a bushel.
In its report, the USDA forecast the nation's corn yield to be about 123.4 bushels per acre -- the lowest level in 17 years.
The agency also revised its previous price predictions. Per bushel, corn is expected to rise as high as $8.90 -- up sharply from previous estimates of $5.40 to $6.40 per bushel.
As a result, food prices are expected to rise, with poultry and dairy products rising before beef.
This year was supposed to be a stellar year for corn farmers as they planted the most acreage in decades last spring, but then drought set in and destroyed much of their crops. More than 60% of the country is in some level of drought, according to the U.S. Drought Monitor.
The announcement was expected, as the USDA has been downgrading the corn crop condition week after week and corn prices have jumped nearly more than 40% since early July. Corn futures -- contracts for commodities to be delivered later -- are now at about $8.20 per bushel on the Chicago Board of Trade.
California livestock farmers, which ship almost of their feed from the Midwest, are bracing themselves as they expect feed costs to continue climbing.
The drought has some in the U.S. clamoring for the Environmental Protection Agency to relax its ethanol production mandates. Currently about 30% of U.S. corn is diverted to ethanol production and critics say the policy drives up corn prices.
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