It's been a tough year on meteorologists. None, it seems, have been able to make sense of the climactic confusion such as why Kansas wheat fields are dustbowl dry, while Central Europe battles the area's worst floods in recorded history.

After a soggy spring, America's heartland has endured a searing summer in which field crops are standing tall but bearing no fruit.

The normally cool dairy lands of the northern U.S. have battled 90-degree temps while middle and Southern California has enjoyed cooler-than-average spells.

Go figure.

And then figure some more, but this time with your calculators. For it appears that, courtesy of the weather, some price increases may be on the way -- just not for the near term.

The grain chain

Grain quality plays a pivotal role in the entire commodities picture. If it's rendered poor by a drought, then cattle, pork and poultry feed prices rise along with the cost of flour.

Poor-quality grain also equates to reduced fat content in meat and milk, which reduces slaughter weight and dairy yields.

In areas where farmers are battling droughts -- most notably the American Midwest, Canada and Australia -- poor wheat and corn crop yields will reduce global supplies and should send prices moving upward soon.

According to the United States Department of Agriculture's (USDA) most recent August report, wheat production in Canada and Australia are sharply lower. Canada's output is its lowest since the drought of 1988-'89, and Australia's crop is expected to be the smallest since the drought of '97-'98.

The numbers for the U.S. are worse: "All wheat production is ... down 4 percent from the July forecast and down 14 percent from (July) 2001. This is the lowest production since 1972," the report said.

While the USDA expects those declines partially will be offset by grain production increases in Kazakhstan, Uzbekistan and Brazil, it still expects a global wheat deficit for the year.

All this, and the summer isn't over. Midwestern fields farmers hoped would be ready for winter wheat planting are still too dry.

"In Kansas, winter wheat is planted in the fall, it goes dormant in winter and is harvested in the spring," said Marsha Boswell, public relations officer for the Kansas Wheat Commission, in Manhattan, Kan. "But there's no winter wheat in the ground right now."

But even in areas where grain is standing, it's likely been harmed by heat stress.

"The harvest is doing quite well at the moment," said Welty. "At the mid point, the yields look very good and the quality is excellent."

John Welty
executive vice president, California Tomato Growers Association

"Any type of stress that's put on wheat will increase the protein content," said Tim Huff, manger of bakery flour technical services for Minneapolis-based General Mills. "Sometimes it could be disease stress, but this year it's drought stress."

Huff said that straight from the mill, flour in a drought year could contain 16 percent protein, a significant step up from the 13 to 14 percent pizzeria operators prefer. Adjusting the protein content, he added, becomes a challenge at the factory level.

"It's always a balancing act between protein quantity and quality of the flour, and this year is going to be more challenging," Huff said.

Huff doesn't believe, however, that pizzeria operators will suffer much in the way of price increases.

"If you take a 100-pound bag of flour and increase the price a dollar, what that means on a per-pizza basis is an increase of a fraction of penny," he said. "It hits you in the face at first when you calculate the price on bags of flour, but when you compare it to your overall cost of ingredients, it tends to be really small -- about 6/10ths of a penny per 20-ounce dough ball."

Scary dairy?

After eight months of wonderfully low cheese prices, operators likely won't have to worry about sharp increases any time soon. Even with the upcoming fall, when costs typically climb due to demand, milk and cheese supplies are well above 2001 levels, and heat stress hasn't harmed the dairy herd significantly this year.

According to the USDA, milk production was 2.3 percent higher than in July 2001, and cheese production was up 4 percent in the same period. Additionally, total U.S. cheese inventories in July were up a remarkable 10 percent over last year, due to a combination of strong spring production and soft demand.

Interestingly, production of Italian cheeses was down 1.5 percent in June when compared to last year. The drop, according to the USDA, was led by a 2.9 percent decline in mozzarella production, which may reflect soft sales in the pizza industry.

Still, two unknowns remain which could send prices up: forage and feed quality, and herd sizes.

With reduced hay supplies and the disappearance of forage (naturally occurring pasture land grasses and plants), dairy farmers will depend more on grain and silage (a blend of coarsely ground, fermented field crops and grasses) to feed their cattle, and thus see their costs rise. Poor quality in either feed type also reduces milk quality, which ultimately means more milk is needed to make all cheese types.

Additionally, increased feed costs often lead farmers to cull herds by selling off older cows for slaughter. But due to an already-glutted beef cattle market, the USDA doesn't foresee a large-scale sell-off this year.

Even if prices do rise noticeably, Dick Grove, editor and publisher of the Cheese Reporter, doesn't believe it will happen soon.

A similar drought in 1988, which hit Wisconsin particularly hard, wasn't reflected in price increases until nearly a year later, he said. He also said that the '88 drought was much more widespread than this year's drought, and had a more lasting impact.

"It hit the whole (Midwest) region that year, and that area provided about 45 percent of the nation's milk supply," said Grove, whose publication is in Madison, Wis. Many dairy farms have left the Midwest since, Grove added, but not necessarily because of that drought.

Grove also said that in Wisconsin, which supplies nearly 13 percent of the country's milk, the weather has turned unusually pleasant this month, and that could send production upward there.

"I'm suspecting milk production is going to bounce back earlier than usual," he said. "August has been marvelous here; some days we had lows in the 50s and some highs in upper 70s."

Meat: It's what's abundant

When it comes to the livestock market, sales are soft all over.

According to Leland Southard, coordinator of USDA Livestock, Dairy and Poultry Outlook, declines in beef consumption in the U.S. -- especially in the mid- to high-end restaurant sector -- aren't the only reason beef cattle numbers are way up.

"We have our economic problems, but Japan isn't doing much, and demand in Mexico is slowing down, too," said Southard, whose office is in Washington, D.C. "It's not like they're switching providers, either. There's just a maturing of the amount of product those countries are bringing in."

Aggravating the decline of beef prices is the rising cost of feeding beef cattle. Beef producers typically offset such rising costs by increasing slaughter numbers, but the current glut will make for a losing proposition. The USDA instead expects beef producers to sell off more calves, which could, in the long term, increase prices as fewer slaughter-weight cattle are matured for market.

"In the longer period, depending on the biological cycle, there will be lower meat production, and prices could increase," said Southard.

The USDA doesn't expect pork production to change much for the year, but it does expect numbers to fall slightly in 2003. "Expected higher feed prices coupled with weak hog prices in fourth-quarter 2002 likely will result in increased slaughter," said its most recent August report. It also predicts pork producers' expansion plans for next year will be put on hold in response to higher feed costs.

"It's If you take a 100-pound bag of flour and increase the price a dollar, what that means on a per-pizza basis is an increase of a fraction of penny. It hits you in the face at first when you calculate the price on bags of flour, but when you compare it to your overall cost of ingredients, it tends to be really small -- about 6/10ths of a penny per 20-ounce dough ball."

Tim Huff
manager of bakery flour technical services, General Mills

Drought-ravaged corn supplies will boost poultry feed prices, but perhaps more onerous to producers' profits are current trade conflicts between the U.S. and Russia. The USDA expects the problems between the two superpowers will be solved soon enough, but that in the meantime, live and dressed poultry stocks are accumulating rapidly.

"There's just a lot of meat on the market right now," Southard said.

That should keep prices low for the near term, he said, but down the road, meat prices overall should climb some.

"Price changes are a lot like the change of seasons," Southard opined. "You don't just wake up one day when it's 90 degrees, and then it goes to below freezing that night. It takes awhile for things to change."

Tomatoes: a slice of good news

In 2001 the California process tomato crop suffered a 7 percent loss after an early-season hot spell, but this spring, growers boldly predicted yields would be 23 percent higher than last year.

It appears they're going to deliver, said John Welty, executive vice president of the California Tomato Growers Association, in Stockton, Calif. That, he said, will ensure a strong supply and stable prices for some time to come.

"The harvest is doing quite well at the moment," said Welty. "At the mid point, the yields look very good and the quality is excellent."

Dodging what Welty called a "curveball from the weather," growers scrambled to rush the pace of the harvest in early July when temperatures in central California spiked briefly. The result was a less-than-1-percent loss of the harvestable crop, which Welty views as negligible given this year's yields.

Welty added that a poor crop in Central Europe is likely to draw on California's excess.

"On a worldwide basis, there's the definite impact of a European drop, and I'd say there's an opportunity to move excess inventory to those markets," said Welty.

Adding that he's sorry for European producers whose loss will be U.S. producers' gain, Welty said it's fortunate that no country will lack the product they need.

"It's a heck of a way to run a business -- to have Mother Nature balance things out for you," he said. "But agriculture, being what it is, in most cases that's what happens."

In the Midwestern tomato fields, David Halt, director of foodservice for Red Gold, in Elwood, Ind., said the harvest just has begun, and that early indications point to "a budget pack this year," meaning average.

Despite the drought in west Ohio, he said all other process tomato fields are yielding fruit of "extremely good" color.

"We won't have an oversupply because of early spring rains, which caused a little later start, too," Halt said.

Related Content

User Comments – Give us your opinion!
Products & Services

Nationwide Criminal Records


Distribution RFP’s & RFQ’s


Leapfrog POS App


POS health test: do a quick check


Enterprise Reporting & Management


Call Center Ordering


Social Security Number (SSN) Verification




Online Ordering


PeopleMatter LEARN™


Fast Casual Executive Summit
Request Information From Suppliers
Save time looking for suppliers. Complete this form to submit a Request for Information to our entire network of partners.