There's an Expensive Food "Fire" Starting in America's Heartland

Garrett Baldwin

Dear Reader,

Everyone loves to talk about oil... and artificial intelligence.

It's either the focus on the global commodity driving transportation systems or the latest hot momentum trend in the tech space. For the life of me, I can't seem to get many people to focus on the things that matter.

You can get by without oil and natural gas. It might be difficult, but it's possible.

But you can't get by without water and food.

And right now, we have a severe problem on the U.S. food front. Let me take you through the latest in the world of agriculture - and why there's a problem brewing in America today.

Hot, Hot, Hot

The map below is the heat map of the United States Department of Agriculture's Drought Monitor. Right now, things are scorching in Nebraska, Kansas, and Oklahoma. The darker the image, the worse the drought.

That yellow stretches from the Texas panhandle all the way up through Missouri, Iowa, Indiana, and Minnesota. That's corn and soybean country. In simple terms, the USDA says the U.S. is experiencing its worst drought in 30 years; about 34% of the U.S. corn crop is experiencing drought, and 28% of all soybeans. Places in Nebraska and Iowa are running low on water - a major drought trend that will likely extend into the foreseeable future.

But those planting numbers are just an appetizer for something much bigger.

On Friday, the USDA will release its critical monthly report, the WASDE (World Agriculture Supply & Demand Estimates). While it's still very early in the season (planting is nearly complete), it can guide us on global supply and demand expectations.

More importantly, the USDA will release its quarterly Stocks and Planted Acreage Report at the end of this month. And that is by far the most important report in the agricultural space.

The June Stocks and Acreage report is the final estimate of what is coming for America for its 2023 harvest. Why does it matter? Because we'll be looking at the expected bushels per acre when drought is picking up.

When analysts increase or reduce planted acreage by one million acres, that's like saying that the number of bushels per acre has increased or decreased by 2 bushels. That's a huge increase or decrease in U.S. supplies.

But there's another important number in that report that you need to understand - the meaning of "stocks" here.

"Stocks" in the equity market and "stocks" in the agricultural market differ greatly.

You might know stocks as the shares in a company that people buy and sell - giving them the right to equity in a company. In agriculture, however, "stocks" are stored grains on farms and within the supply chain. It's the existing inventory of that grain.

So, if the "stocks" number comes in lower than estimates, which signals that there is less available supply than expected. This could lift prices higher - assuming no dramatic upt…

Garrett Baldwin

About the Author

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Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.

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