It’s time to really focus on this major US drought, which has sent commodity prices for corn and soybeans soaring, leading to a likely jump in global food prices. You know it’s bad when the Financial Times gets on the case.

The world is facing a new food crisis as the worst US drought in more than 50 years pushes the agricultural commodity prices to record highs.

Corn and soyabean prices surged to record highs on Thursday, surpassing the peaks of the 2007-08 crisis that sparked food riots in more than 30 countries. Wheat prices are not yet at record levels but have rallied more than 50 per cent in five weeks, exceeding prices reached in the wake of Russia’s 2010 export ban.

The drought in the US, which supplies nearly half the world’s exports of corn and much of its soyabeans and wheat, will reverberate well beyond its borders, affecting consumers from Egypt to China.

“I’ve been in the business more than 30 years and this is by far and away the most serious weather issue and supply and demand problem that I have seen by a mile,” said a senior executive at a trading house. “It’s not even comparable to 2007-08.”

(As a side note, really Financial Times? Soyabeans?)

The 2007-08 crisis was largely the fault of commodity speculation pushing oil and food prices upward. This is a “natural” event (if you ignore the man-made effects of climate change leading to weather events like droughts), perhaps not as bad as the Dust Bowl years of the 1930s, but as bad as any drought since 1956. We haven’t seen the full impact hit the markets yet, but it can’t help but have an impact, given the huge market share of corn and soybean exports from the United States.

Just a word here about the Federal Reserve’s “credibility.” Their resistance to engage in monetary accommodation was tied directly into their credibility on prices, wary of anything that even looks like inflation. The drought shows that this is not completely within their power. They didn’t control the weather, and now we’re sure to see commodity inflation at home and abroad. Surely we would be in a better position to deal with this if we weren’t in this holding pattern on the economy for the last couple years, with the Fed unwilling to take measures to boost growth. Now this drought strikes in the middle of a shaky economy and could send it tipping over the edge. This will directly affect consumer spending on key necessities – if you can find a food product these days that does NOT include corn or soybeans, bravo – and raise costs for restaurants, a key part of the small business sector.

The worst outcome would be for the Fed or other central banks to react to rising corn and soybean prices with monetary tightening designed to get inflation under control. That would harm an already battered economy and basically lead to the worst of all possible worlds, in the name of keeping a lid on inflation.

It would be nice if this tragedy led to a fundamental rethinking about the national security and macroeconomic implications of climate change, but let’s not get crazy here.