Side effects ... Australian grain farmers stand to profit.
Australian farmers will mostly benefit from soaring grain prices due to the worst American drought in 50 years. Consumers will fare less well but are relatively sheltered compared with those in the US and China.
Corn continues its biggest monthly rally in more than two decades, with global prices hitting records this week. Global wheat, corn and soybean prices have surged by about 40 per cent since late May as farmland through the US midwest has wilted under searing temperatures.
Australian grain farmers stand to profit from the climbing prices unless late season floods ruin crops as has been their misfortune in the last two harvests. Even farmers who would normally suffer from more expensive grain - the chicken, beef and pork producers who buy the grain to feed their animals - are relatively sheltered in Australia because a good deal of "feed wheat" is lying in storehouses after the last two flood-marred harvests yielded huge quantities of low-quality grain.
Plenty are speculating that higher grain prices will lead to a spike in chicken and pork prices in Australian supermarkets, because the price of feeding these animals accounts for a large proportion of their production costs, says NAB agribusiness economist Michael Creed. These speculators are probably overdoing it. Mr Creed expects meat prices to rise but more modestly.
Based on past grain price shocks, Mr Creed expects it will take about six months for the higher cost of chicken feed to translate into more expensive chooks in Coles and Woolworths. He adds that while beef prices will climb later this year, they are likely to remain steady over the next few months as American farmers, who can no longer afford to feed their cattle, are rushing their beasts off to be slaughtered. The resulting short-term spike in supply will put downward pressure on the global price of beef.
The surging grain prices come as a great relief to farmers, according to NSW Farmers' Association president Fiona Simson.
"The drought in America and the pressure on the grain supplies is ultimately going to be a good thing for farmers," said Ms Simson, who herself raises cattle and grows wheat and canola on her farm in the Liverpool Plains in northern NSW.
"We've had quite a good growing season over most parts of eastern Australia," she said.
"We've had good planting rains back in April, May when people planted their crops ... Most of eastern Australia now I would say has a crop that is quite well established and most people would be certain of some sort of a crop, barring disaster."
Many wheat farmers have told Ms Simson they are confident they will be able to "forward sell" up to a quarter of their crop at the current high prices, locking in at least a partially happy return on their harvests.