http://potashandphosphate.com/bad-news-if-you-like-to-eat-good-ne...

http://potashandphosphate.com/bad-news-if-you-like-to-eat-good-news-if-you-sell-fertilizer/

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There is some bad news and some good news. The bad news is for consumers, as they will have to pay more for food in the next few months. The good news is for commodity investors, especially those with large potash and phosphate positions because North American and European wheat futures have increased considerably. A severe drought in the Midwestern United States has greatly reduced soil moisture levels, lowering crop yield expectations. The USDA’s corn production forecast has dropped from an expected 166 bushels per acre (bu/acre) to 146 bu/acre. The drop has been sharper than expected. The lower crop forecast, and corresponding high crop prices, is expected to prompt farmers to maximize harvests, driving demand for potash and phosphate (and Nitrogen). As grain prices rise, mineral fertilizer prices will also rise. Thanks to a favorable US Dollar exchange rate to the Euro, European futures also grew in response to the lower crop yield expectations in North America.

The ‘croppy’ news from the ‘new continent’ only served to boost futures that were already at historically high prices. Paradoxically, while the USDA ‘s crop price increases were prompted by drought concerns, the shortage, and higher value, of European crops has been attributed to heavy rains, which ruined harvests, especially in France, which is one of the largest grain producers. In 2007-2008, high grain prices forced food prices to rise so sharply as to provoke a veritable food crisis. This prompted many countries to stock up on grains in an effort to maintain price stability such as avert this scenario; however, there were expectations of a good US harvest for this year.