Using the word “disaster” is not an over-exaggeration to describe the drought in the Midwest, says Scott Shellady, the commodities trader who sports the famous cow-print jacket at the Chicago Board of Trade.A heatwave and a severe drought have devastated U.S. farmland causing corn and soybean crops to wilt and that means we could likely see the impact in prices at the dinner table.
In the short term, Shellady predicts that we could see 3 to 5% price hikes in many food products.
That’s because “corn is the ‘wonder drug’ in the things we eat,” he explained.
In the last five weeks, the drought has pushed U.S. corn and soybean prices up ~55% and ~26%, respectively, according to Reuters.
‘It’s Too Dang Hot To Barbecue’
Meanwhile, prices for beef and pork markets have slumped.
The reason, Shellady explained, is because it’s too expensive to feed the cattle so they’re being rushed to market.
He added that prices are also lower because demand is down in part because of the higher temperatures.
“It’s too dang hot to barbecue,” Shellady told Business Insider.
However, in the coming months there could be a shortage of beef.
There Can’t Be a Shortage Of Corn Forever
The current drought is now covering the widest land expanse since 1956. Shellady added that he thinks it’s also worse than the drought in 1988 because in that year there was a carry-in excess in corn from the previous year.
This year, the most recent corn yield estimate from the USDA is now 146-bushels per acre, which is lower than expected. Shellady pointed out that some private sector analysts have even lower estimates than that at a high 120/low 130 bushels per acre range.
What’s more is Shellady said that they’re not in the fixed income or equities markets and that agricultural commodities markets are “terribly cyclical.” Sometimes there are off years.
“There can’t be a shortage of corn forever, but we could run out in the short term,” he told Business Insider.
And since they plant every year, it could be totally different next year.
In addition, he said we still have access to grains from different areas of the world. There could also be relief from South America, which has a planting and growing season opposite of the U.S, he said.