Grain prices have soared once more after the US Department of Agriculture slashed estimates for a number of global regions including Russia, China, Canada and the European Union. On Monday, USDA forecasters downgraded harvest estimates from a number of global regions, largely due to poor weather.

Below average Monsoon weather in India, droughts in the black sea region and Canada and a year of challenging weather events in Europe have all combined to impact on yields. Furthermore, the United States’ principal crops of maize and soy received their eighth consecutive downgrade; just 24 per cent of US maize was rated ‘good’, of this only 3 per cent was rated as ‘excellent.’ Soybeans fared a little better with 29 per cent rated ‘good’.

Little rain has fallen on the United States’ principal growing areas for months and temperatures are between five and 10oF above average. However, longer term weather forecasts made at the end of July suggest more favourable conditions may be on the horizon.

Prior to the USDA release, pressures had eased in the grain markets, where record prices had been seen after the United States’ worst drought in fifty years sparked rallies. Wheat prices on the Chicago Board of trade have risen 46 per cent in two months.

The USDA downgrades shave 13m tonnes off harvests worldwide. Many major wheat producers suffered downgrades, but China was hardest hit, with USDA officials forecasting the lowest wheat crop in seven years (predicting 108.0 million tonnes against an official USDA forecast of 118.0m).

USDA also downgraded Canada’s wheat harvest by 300,000 tonnes on drought and increased planting of oilseeds. The EU crop was downgraded 1.1 million tonnes to an estimated 132m on the effects of wet weather in France and the UK in particular.

News that wheat yields will be down along with maize and soy, affected by the US drought and the residual effects of drought in South and Central America, will prove a blow for the world’s most food insecure; the UN Food and Agriculture Organisation has said grain rallies and the prevailing attitude in the market will impact most severely on the world’s poor, although there are adequate supplies of many staple grains.  

The official USDA Global Crop Forecast is due for publication on 10th August. Analysts at Barclays bank had previously speculated the USDA may downgrade estimates from a number of global regions.

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