US crops wither in scorching heat

Drought is blistering key U.S. cash crops, further elevating prices for staples, including corn and wheat.

The punishing dynamics of a torrid summer were evident this month on the Pro Farmer Crop Tour, an annual event in which farmers visit key growing areas across the grain belt to gather data on the coming harvest. Driving along state Route 14 outside of Verdigre, Neb., Randy Wiese turned to see a farmer harvesting hay. The piles were small.

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"That farmer is sick to his stomach," said Mr. Wiese, who farms 800 acres of soybeans and corn in Lake Park, Iowa.

He isn’t alone. Farm incomes have been hit hard over the past two years, first when COVID-19 shutdowns hammered prices and afterward when hot, dry weather reduced output, limiting farmers’ capacity to cash in on rising demand and higher prices.

Extreme heat is baking most of the U.S. North Dakota, South Dakota, Minnesota, Iowa and Nebraska all contain areas of extreme drought, according to data from the U.S. Drought Monitor. North Dakota and Minnesota, in particular, are experiencing near-record lows in soil moisture, according to data from the National Oceanic and Atmospheric Administration.

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As a result, many crops planted this spring are wilting. Some 63% of the U.S. spring wheat crop is in poor or very poor condition, versus 6% at this time last year, according to Agriculture Department data.

The poor weather has caused the USDA to scale back its expectations for U.S. crop production in 2021 – which, in turn, is causing domestic inventories to dwindle. In the USDA’s latest monthly supply and demand report, the agency pegged ending stocks for corn, wheat and soybeans all at their lowest level since 2013.

"The impact of the drought is clear; there’s no way around that," said Chip Flory, leader of the tour’s western leg.

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Grain futures trading on the Chicago Board of Trade has had a volatile year, reaching near-record levels in May. Futures were mixed in trading Monday, with most-active corn futures down 0.3% to roughly $5.35 a bushel, soybeans up 0.2% to roughly $12.93 a bushel and wheat up 0.7% to $7.33 a bushel. For 2021, wheat and corn prices have risen 11%.

For row crops, prices might climb further if bad weather persists. "The ingredients for a demand-led bull [market] are firmly in place as international markets rise," said agricultural research firm AgResource Co. in a note this month.

Farms elsewhere are getting scorched, too. Last month, the International Grains Council cut its forecast for global grain harvests in the 2021-22 season. The intergovernmental agency forecast world production at 2.295 billion metric tons, 6 million tons less than it was expecting in June.

Brazil’s second crop of corn, grown in the winter, has been greatly diminished due to drought. The winter crop is projected by the country’s crop agency to be 60.3 million metric tons, down from 75.1 million tons at this time last year.

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Wheat crops in Russia are also suffering due to drought, causing forecasters to cut their outlook for wheat production there. In its latest agricultural supply and demand report, the USDA pegged its forecast for Russian wheat at 72.5 million metric tons, down 12.5 million tons from its estimate in July and below estimates provided by other firms tracking the region.

"This season, dry July weather and smaller wheat area numbers were a game-changer for the Russian crop," said Andrey Sizov, head of Russian agricultural research firm SovEcon. In a note published earlier this month, Mr. Sizov said that soil moisture in wheat-growing regions in Russia was at its lowest levels in a decade.

Write to Kirk Maltais at Kirk.Maltais@wsj.com