Consumers to pay more, but many Canadian producers see rewards from U.S. drought

OTTAWA – Drought conditions across large swaths of the United States and parts of Europe are raising concerns about a food-price shock later this year.

But while consumers brace to pay more for everything from corn flakes to bread and beef, many Canadian farmers hope to reap rewards from historically high grain prices.

“It’s simple supply and demand,” said Myron Krahm, vice-president of the Manitoba Corn Growers Association.

“The U.S. being the largest corn producer in the world, if they are suffering that just limits supply and prices in return run up.”

Farmers south of the border will see just a fraction of the corn they expected in the spring when the ground was seeded, the U.S. Department of Agriculture warned earlier this week.

That prediction sent the price of corn through the roof — up by about 30 per cent compared with just three weeks ago. Almost all other grain commodity prices are higher as well.

If the better growing conditions hold in most major regions of Canada over the rest of this month, farmers will cash in, said Krahm.

But while some farmers are seeing bumper crops, others are facing drought conditions similar to those in the U.S.

Southern and Eastern Ontario are feeling it the most, said Agriculture and Agrifood Canada’s Trevor Hadwen.

“It’s not quite as bad as the U.S.,” he said.

“(But) approximately 40 per cent of the agricultural land in Ontario is in the record dry or extremely low (moisture level) category.”

That’s equivalent to about 14,000 farms facing losses from drought conditions.

One of those farms is owned by Markus Haerle, who grows corn, soybean and spring wheat in St. Isodore, about 75 kilometres east of Ottawa.

“It is getting to a point where we see stress on the plants, especially corn is hurting the most,” said Haerle, whose land is cracked and dry.

“If we don’t get rain in the next week, we can probably count on a 10 to 20 per cent reduction in yield.”

Weather forecasts for the region show temperatures rising over the next week with little or no precipitation.

And while warmer spring temperatures allowed farmers to plant crops in southern Ontario about two weeks earlier than normal this year, the corn is at a critical pollination stage over the next two weeks when hot temperatures and dry conditions can stunt the growth of ears and prevent kernels from fully developing.

Grain prices have increased steadily over the last few years, and this year’s drought will only increase the potential for a price shock on store shelves, says John Cranfield with the Canadian Agricultural Economics Society.

“This is something that’s going to be of a more serious concern, largely because we’ve just gone through a period of seeing particularly high commodity prices, especially for the staples like grains and feedstuffs that go into livestock production,” he said.

“This drought is going to exacerbate that effect or continue it even further.”

Higher prices for corn, for example, mean cost hikes for hamburger and steak because corn is used to feed cattle. As well, higher grain prices translate into higher costs for chicken and other grain-fed animals.

Corn also is widely used as an ingredient in cereals, ketchup, bread and soft drinks, although it accounts for a small fraction of their costs compared with marketing and getting products onto store shelves.

Even land prices are impacted as farmers in high-yield areas who benefit from higher grain prices use the money they earn to buy up scarce open fields so they can plant more crops next year.