On Friday, the U.S. Agriculture Department downgraded its 2012 corn forecast by 13% from last year’s crop, to 10.8 billion bushels. That would be the shortest harvest since 2006, even though the acreage planted with corn rose 4% since last year and is the highest since 1937. Scorching temperatures and little rainfall have left only 24% of the crop in good or excellent condition in the 18 major corn belt states, down from 72% in June. These represent the largest month-to-month potential declines in grain yields since the USDA started to keep records.

Also on Friday the USDA’s world agricultural outlook board estimated that global corn consumption will be off by 38.9 million tons, with the U.S. problems responsible for three-fourths of the shortage. The gap is likely to presage climbing basic-food commodity prices. Corn futures are up nearly 50% over the last six weeks. The U.S. market is so important because the U.S. accounts for 60% of global exports, and corn feeds cows, pigs and chickens and is also a key ingredient in all kinds of foods. …

Corn is also a key ingredient in the combine of political power and corporate welfare that is U.S. alternative energy policy. The food-to-fuel mandate is known as the Renewable Fuels Standard (RFS) and requires 13.2 billion gallons of ethanol to be blended into the gasoline supply this year and 36 billion gallons by 2022. These quotas are fulfilled almost entirely by corn ethanol. Four of every 10 bushels in 2011 went into the stuff. For the first time ever, more corn is devoted to the fuel than to livestock.