The market has shifted dramatically in recent weeks, reflecting the severity of the crop losses. The reduced yields will force a shift in supply and demand that will be felt on a global scale. Indeed, USDA has slashed its estimates of both U.S. carryover, and world coarse grain stocks, to their lowest levels in almost 20 years. And world wheat carryover will fall to 1995 levels.
Those decreases have some concerned about the probability of feeding an increasingly hungry world.
The U-S drought is only one part of a worldwide grain production shortage. Global production has fallen short of global consumption for three straight years. That includes this year with a deficit estimated at 83 million tons of grain.
Lester Brown, is president of the Earth Policy Institute.
Lester Brown, President Earth Policy Institute: "The world's farmers will somehow need to increase production by 83 million tons just to reach the break even point and then they will also need to increase it 15 million tons to accommodate to supply the food for the 80 million people who are being added each year.
The current shortfall has been caused for a variety of reasons including weak prices, record high temperatures in many grain growing regions, and perhaps most unexpectedly, dropping water tables.
Aquifer over pumping is a problem that has developed in recent years throughout the world. Irrigated farmland now accounts for 70 percent of China's grain, 50 percent of Indian grain, and 20 percent of U-S grain.
China, the world's largest producer of grain, has seen annual wheat production drop from 123 million tons to 92 million tons, mostly due to a combination of drought and water table issues. The Western U-S has been hit with the double whammy of low rainfall and exceptionally high heat. Also added to the mix are droughts in Australia and Africa.
Brown claims a doubling in world grain prices, similar to what happened in 1972 to 1974, would impoverish more people in a shorter period of time than any other single event in history.
Lester Brown: "In thinking about water I think the most important thing with water is getting the price up so it reflects more nearly both its costs and its value to society. We're still treating water in much of the world as if it were an essentially free resource."
Brown argues a rise in world water prices would increase efficiency in agricultural water use. According to his numbers, it takes roughly 1000 tons of water to produce a single ton of grain.