Worries about the U.S drought propelled corn, soybean and wheat prices to lofty records this summer, but commodity bulls in the grain pits may want to temper their enthusiasm just a bit.
Despite the well known fears over the state of the U.S. crop, total global grain production this year will soar to a record of 2.4 billion tons, up 1 per cent from 2011, according to the Worldwatch Institute, a Washington-D.C. based think-tank.
The forecast suggests the world’s food situation isn’t quite as dire as a U.S.-centric look at grain production alone might imply, and accordingly, the institute titled its new report on the crop outlook “Global grain production at record high despite extreme climatic events.”
The prospect that global harvests might be a tad better than expected may already be impacting grain prices. The Scotiabank commodity price index for August, released Tuesday, saw its agricultural component fall 13.2 per cent during the month on an annualized basis. It was up only a modest 3.6 per cent over the past year.
As its name might suggest, Worldwatch is big on environmental sustainability, and the organization isn’t downplaying the U.S. drought and the long-term outlook for crops, given the rising number of extreme climatic events such as heat waves and floods.
It said the drought in the U.S. Midwest and Great Plains is the “worst in 50 years, coming close to matching the late 1930s Dust Bowl. The drought is expected to cost many billions of dollars and could top the list as one of the most expensive weather-related disasters in U.S. history.”