Less than a year after the worst drought in a generation destroyed one-third of Russia's wheat crop and sent global food prices surging, more bad weather is damaging fields from North America to Europe to Asia.

Corn planting in the U.S., the world's largest grower, is advancing at half of last year's pace because of excess rain, government data show. The Canadian Wheat Board said fields are so muddy that only 3 percent of grain has been sown, compared with 40 percent normally. At the same time, drought left the Kansas wheat crop in the worst shape since 1996, and dry spells are threatening crops in France, Western Australia and China.

While the growing season is still early in the Northern Hemisphere, corn futures as much as doubled in the past year as U.S. stockpiles headed for a 15-year low, and wheat is up 58 percent from a year earlier. The United Nations says global food costs advanced in April for the ninth time in 10 months, and higher commodity expenses led food makers including General Mills Inc. and McDonald's Corp. to boost prices to consumers.

"We needed everything to go perfectly, but there's really a lot of potential for problems, based on these weather issues," said Sterling Liddell, a vice president for food and agribusiness research at Rabo AgriFinance in St. Louis, who expects corn to reach a record $8 a bushel if conditions worsen. "It could be a very explosive situation, because we're already so tight."

David Fuller's view Subscribers may recall that Evelyn Browning Garriss forecast in the April edition of her excellent Browning Newsletter that the retreating La Niña would bring floods and delayed planting in the US grain belt. We are certainly seeing that and drought is a problem in Europe's grain regions once again, this time including the UK as well. Drought may also be a problem in China's corn region for the second consecutive year.


The Browning Newsletter also forecast more favourable growing conditions for the USA during the summer. Let us hope so because the risk of continued food inflation and further shortages is currently very real.

If conditions for crops do not improve, wheat (weekly & daily) and corn (weekly & daily) would appear to have the most upside scope. Wheat remains rangebound but the overall pattern can still support higher levels. Corn's medium-term trend has seen a loss of consistency since March, suggesting that traders have been reducing long positions. However it steadied yesterday and a close beneath $6.80 would now be required to indicate additional downward mean reversion towards its rising 200-day moving average.