The probability of additional increases in the global grain prices is now higher than before. This is due to the forecast of potential summer drought in the Midwest by agricultural meteorologist Dr. Elwynn Taylor of Iowa State University. He is the highly regarded guru of weather forecasting for agricultural yield, especially corn. In his 2008 forecast for corn, Taylor notes that the corn yield is projected to be lower due to below average precipitation caused by the La Nina, a weather condition in the Pacific Ocean:

“The risk of below trend (150.6 BPA [bushel per acre]) US Corn Yield is 72% with La Nina and will diminish to 60% if the La Nina fades before June arrives.” [i]

Dr. Taylor has also noted two other ominous signs for a lower Midwest corn yield:

“History tells us that the average time span between major droughts in the Midwest is about 19 years," he points out. "The last major drought was 1988 -- 19 years ago."

"Out of the 17 major droughts that have occurred in the Midwest in the past 100 years, 16 were preceded by a major drought in the Southeast," says Taylor. "So, the drought in the Southeast is another bad sign."

"We have no scientific evidence to think that all three factors [La Nina, 19 year drought cycle, SE drought preceding the Midwest drought] and will gang up on us next year to create a major drought, but these are certainly all factors that will put people on edge."

If Dr. Taylor is correct, and I think he will be, then the likelihood of the current grain shortage intensifying has gotten more certain.

Another ominous sign comes from the National Agricultural Statistics Service (NASS) Crop Progress report, a service of the Agricultural Statistics Board of the U.S. Department of Agriculture. As of April 21, the NASS Crop Progress report notes a lower crop planting of corn than same period last year – 4% versus 17% – in 18 states that account for 91% of all corn planting. Rice and winter wheat were also lower than last year at 26% versus 43% in 100% of the rice growing states and 7% versus 14% in 90% of the winter wheat growing states, respectively. As for the winter wheat, the report goes on to note that the quality of the winter wheat is lower this year than last (55% of the winter wheat was of fair quality or worse versus 46% of the winter wheat last year).

Risk Events Arising From the Growing Grain Shortage
In addition to the 14 risk events that I have noted previously, expect the following risk events to unfold:

* As drought hits the Midwest, the crop yields for corn and wheat will be lower, resulting in ever-higher prices for these grain as well as other grains that will move upward in a sympathetic move
* Prices of products containing corn syrup, cereal, meat, dairy, and ethanol will increase rapidly
* Shortage of corn and wheat will force the U.S. to export less abroad, further increasing the spot price of grain and exacerbating the grain shortage worldwide
* More countries will halt exports of grain to ensure sufficient supply of grain for domestic consumption
* Expect to see / hear news of mass migration of people trying to escape local food shortages
* Rapid advances in and acceptance of genetically modified grains as substitutes without understanding the full consequences
* Higher ethanol production prices will result in higher gasoline prices at the pumps
* Gasoline, diesel, and electric prices will rise as speculators take advantage of the rising grain shortage to drive up the prices of other commodities
* Water rights will become valuable and contested, especially in arid areas

Silver linings

Even in the most negative situation, there are positives that can be gleaned from it:

* Americans’ food portion will be smaller due to the higher food costs. This will lead to lowering of obesity rate and other health problems associated with overeating
* More families will turn to growing their own vegetables to make ends meet. This will increase healthier eating habits, further reducing health problems
* As more families begin eating smaller portions, the amount of garbage will decrease. This will result in lower landfill and associated pollution
* Americans facing strained household budgets will begin to economize, which will lead to decrease in overall consumption, including oil based products – less driving, less packaging, less eating out, etc.
* Higher fuel costs will lead to increased carpooling and less driving, which will help to reduce traffic and lower pollution levels in many cities
* Higher fuel cost will spark a renewed awareness in conservation not only of food but of fuel, electricity, water, and other limited resources

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