Last week, a developing three-state drought in the United States that has swept across North and South Dakota and Montana caused a spike in the price of wheat, and on July 3 the other grain markets started to move aggressively to the upside. Grains were the second-best-performing sector in the commodities market in Q2, posting a 13.34% gain.
The last time there was a significant drought in the United States was back in 2012, and the prices of soybeans and corn rose to all-time highs, while wheat rallied to over $9 per bushel. Soybeans peaked at $17.9475 in September 2012 right before the harvest season. Corn reached a high of $8.4375 per bushel in August 2012, and wheat topped out at $9.4725 in July of that year. Soybeans and corn traded at all-time highs in 2012, but wheat found its high that year below its record peak at $13.3450 in February 2008.
In addition, as the emerging markets become wealthier they add more animal protein into their diets. This takes a tremendous amount of grain to produce livestock. I am a long term bull on agriculture although with the caveat that prices are volatile.