From Agora’s Daily Reckoning:
Australia, one of the world’s strongest performing economies over the last decade, is in the throws of its worst drought in recorded history. Earlier this year, Prime Minister John Howard told a largely non-religious Australian population to, “hope and pray there is rain.”
Down Under, drought is wreaking havoc on the nation’s major export crops. Production of cotton, a notoriously “water-heavy” crop is predicted to fall by 29% this year. Given that Australia is the fourth largest cotton producer in the world, this is bound to have widespread effects. Many industry analysts believe the chance for Australia’s cotton industry to recover for the 2008 period has already expired.
Wheat is another crop that has been all but decimated by lack of irrigation. In Australia, the world’s third largest producer of wheat, the 2007 crop fell a staggering 29%, down almost 10-million tones. On the other side of the equator, droughts in Canada have contributed to their wheat production forecast being cut by up to one fifth and China’s output is estimated to come up around a tenth lower thanks to water-related catastrophes – both drought and floods. Over in the Ukraine, the world’s 7th largest wheat producing country, shipments will be a full 58% lighter this year thanks to, you guessed it, drought.
These shortages, coupled with rapidly increasing demand from emerging nations, has seen wheat prices soar to record levels. Last week, wheat traded for $7.44 a bushel on the Chicago Board of Trade. In the UK, bread making wheat was trading at almost $400 per tone…double last year’s price.