Impact of the U.S. Drought on Canadian Consumer Food Price Inflation

Severe drought conditions across much of the U.S. farm belt in the spring and summer along with problems in other major growing areas around the globe, have weighed heavily on prospects for world crop production in 2012. With respect to the U.S., in an August update to their annual crop production forecast, the United States Department of Agriculture (USDA) noted that temperatures in much of the U.S. Corn Belt in July 2012 were more than 6 degrees above normal and precipitation levels 50% below normal. As a result, at the end of July, conditions were rated very poor to poor for 48% of corn acreage in the 18 major corn-producing states. The share of the national soybean crop rated very poor was 37%, a level that the agency noted was the highest value observed at any point in 1988, a year when U.S. agricultural output was also disrupted by severe drought.