A “perfect storm” is brewing for midwestern farmers. Unending rains have led to the flooding of tens of millions of acres of farmland. The deluge comes on the heels of years of low crop prices.

It has the makings of an agriculture disaster on a scale never seen before.

The nation may see a “perfect storm” in terms of food inflation. Prices for some farm commodities figure to be a lot higher in the months ahead as markets adjust to dramatically lower crop yields. This will be coupled with price hikes associated with tariffs on all manner of goods from China and elsewhere.

To top it off, the Fed is signaling a reversal. The next move in interest rates now figures to be lower.

Grain and soybean prices are already on the move. Corn prices began climbing rapidly in early May. Today the price per bushel is 20% higher than a month ago. Wheat prices are 7% above the lows of a month ago, and soybeans are 11% higher.

Chinese tariffs on U.S. agricultural products pushed prices lower earlier in the year. However, the longer-term effect of those particular tariffs may wind up being less than many think. The market for food commodities is global and demand is somewhat inelastic.

More than a billion Chinese need to be fed. What they don’t purchase directly from the U.S. will need to be purchased elsewhere. We can expect to see an increase in American exports to other places.

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