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)

Industrialized Leaders See Threats

The finance ministers of the Group of Eight industrialized nations,which include the U.S.,U.K.,Japan,France,Germany,Italy,Canada and Russia,are alarmed by surging oil and food prices.These prices pose a threat to the world economy as a serious challenge to stable growth,with serious implications to the most vulnerable and global inflationary pressure.Meeting over the weekend in Osaska,Japan,the ministers stated that tight supply and increasing demand was the main factor in high oil prices,though geopolitics and speculation were also to blame.U.S. Treasury Secretary Hank Paulson noted that oil production capacity hadn't risen in 10 years.The oil-producing countries should open themselves up to more exploration and production.British Chancellor of the Exchequer Alistair Darling said what we need to do,as a matter of urgency,is to increase supplies.Italy's finance minister,Giulio Tremonti,described the effect of speculation as enormous,and wants to increase the margins required of oil traders.The G-8 ministers also praised two new funds to help developing countries fight global warming.They said they remained vigilant in the face of uncertainty and downside risks in the world economy.They will take appropriate actions,individually and collectively,to secure stability and growth at home and abroad.