This plunge will bring pricing back to similar levels seen in the second quarter of 2012, before the drought impacted yields. U.S. corn and soybean pricing is expected to decline at even sharper rates in the fourth quarter, falling by 27 and 24 percent, respectively, while wheat will see a slight 5 percent increase.

Commodities tracked by the IHS Global Insight Soft Commodity Price Index (GISCPI), a weekly soft commodities price index that analyzes worldwide pricing trends for core agricultural commodities, include feed grains, food grains, meals and oils, cotton, sugar, dairy, and meats and products.

The GISCPI reflected the price declines for U.S. corn, soybeans and wheat, and has retreated from its drought-inflated 2012 levels. On July 26, the GISCPI stood at 2.30, down from the recent high of 2.87 almost exactly one year earlier on Aug. 21, 2012.

“The drought decimated the U.S. great plains and the corn belt during the summer of 2012,” says Ryland Maltsbarger, principal agriculture economist for IHS.

“The planting season in spring 2013 started out much worse than in 2012 with a majority of the crop going in late. However, while the drought is still lingering in certain areas of the United States, we are in a better position than we were one year ago.”

Feed the world
While U.S. corn and soybean yields are expected to come in at below the trend line average in 2013, they will be much higher than they were in the previous year.

In Russia and Ukraine, the breadbasket of Europe, the weather this year was conducive to an early start to the harvest, although dry warm weather in late spring had cut production outlooks slightly. Because of the early harvest, cheap wheat supplies are beginning to flood the market.

Meanwhile, the second corn crop from Brazil avoided any kind of event that would cut down yields.

Wheat check
The magnitude of weekly wheat imports from China this year has shocked the trade. As a result, the U.S. Dept. of Agriculture has increased 2013/14 Chinese wheat imports to 8.5 million metric tons, which is very large for China on a change basis.

Pressure crop
The bottom line for the global agricultural business is that commodity prices are being pressured by the growing reality that global grain balance sheets may actually loosen, Maltsbarger said.

Following major declines for corn and soybeans in the fourth quarter, pricing for all U.S. agricultural commodities is expected to stabilize and see some level of support after the beginning of 2014.  FG

—From IHS news release