Sunday, August 19, 2012

Deep Drought Continues

Well the USDA farm report continues to look bad for corn and soybean crops. The outlook for rain continues to be dismal. This combined with this years grain crops, and you have all the makings of a very tough winter ahead.

I am sitting here watching the drought watch, and the prediction continues to be bad. The dairy industry had been downgraded, with the rise in feed prices being cited as the main reason. If the current trends continue, especially through the winter, we may see many dairy operations selling off, contributing to the increase in dairy prices.

While the increase in. dairy prices at the gate would be good for the farmer, it would seem, it means the cost at the store will increase dramatically, meaning a decrease in demand. This downward spiral may be exasperated by what is predicted to be a light snow load, meaning a continuation the drought. If this does carry, feed prices, food prices, fuel prices, will go to heights not previously seen. This could mean massive good shortages globally, as our imports are cut, and many other producer countries also suffer from the same or worse drought conditions.

To compound this the only place that is getting rain is the primary rice producer countries, too much rain in fact, damaging the annual rice yield dramatically. This could be devastating to the global food markets.

The only winners here are the CBOT speculators, provided they have bet against the crop numbers, and in that way, against humanity. If everything maintains, the farm bill may be moot at best.

Well that's my look on the drought report this week.

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