Farm Facts:Fear in the Grocery Aisles As Drought Deepens

Another heat wave is scorching farms from the Midwest to the East,prolonging a devastating and historic drought.Sentiment is cracking out there,said Ann Duignan,analyst at JP Morgan Chase.Only 40% of crops are in good condition.Farmers will probably take big losses and not spend.You can't switch crops this late.We are in a very,very serious situation as far as grain is concerned.We are likely to continue to see food prices increase.
Farming practices themselves have changed.Farms are becoming larger and adding technology like GPS and auto-steer.Now four people are running a 3,000 acre farm.
Soybeans are also in a squeeze.China's consumption of soybeans is way up.It's the urbanisation of their diet.Chinese consumers want more protein.
Forty percent of our corn crop goes into ethanol for a gasoline additive now.Ethanol drives all crop prices up because farmers planting the corn it is made from means less acreage for other crops,resulting in another scarcity factor.
Food prices are expected to rise markedly by autumn.The worst harvest since 1973 is projected.Cattle feed,ethanol and corn syrup may become more expensive from the drought.One third of the corn crop is in trouble.Corn prices impact 75% of the items in a grocery store.
Cattle is already being sold early because forage is scarce and farmers can't afford to buy feed.Corn and soybean prices were sharply up on Monday.
Archer Daniels Midland(ADM),Safeway(SWY)

Canadian Ideas:Trends in Agriculture

Corn production was overestimated,according to John Stephenson,senior vice-president and portfolio manager at First Asset Investment Management.Look for higher corn and soybean prices.Corn is moving higher in the second half of the year;the U.S. is responsible for 65% of the corn trade.
The U.S. situation is extremely good for fertilizer producers.Farmers are planting so late in flooded fields.They're gonna have to refertilize-especially in the fall.
Eventually,supply will meet demand,but China looks to be an importer this year.Farmers are rushing to plant corn.
There's a very strong market for potash and nitrogen-based fertilizers.Within South America,Monsanto is doing incredibly well with its seed.China is also adopting this seed.
What happened in America in terms of the predominance of large-scale farming is also gonna happen in China,Mr.Stephenson predicts.
First Asset Investment Management is a Canadian firm that offers Toronto Stock Exchange-listed investment funds,mutual funds,principal-protected notes and flow-through limited partnerships.It has around 2.5 billion dollars under management.
PowerShares DB Agriculture Fund(DBA),PowerShares DB Commodity Fund(DBC),Monsanto(MON),Potash Corporation of Saskatchewan(POT)