Grain prices keep falling, despite drought

Grain prices keep dropping, even though more than half of the Lower 48 states remain in a drought. That's good news for inflation.

Why it matters: If sustained, the decline in wheat, corn and soybean prices could ease the rise in food costs and help policymakers knock inflation down a bit.

Driving the news: Over the last three months, prices for wheat, corn and soybeans are down about 35%, 25% and 17%, respectively.

• That's a remarkable turnaround from the soaring prices seen earlier this year.

What's happening: a few things.

• Fears of economic slowdown and weakening demand — particularly in China, the world's largest soybean consumer — started to slam prices back in June.
• Rainfall over the last few weeks has eased dry conditions somewhat in key corn belt states such as Indiana, Illinois and Iowa.
• The tentative return of Black Sea grain shipments from Russia and Ukraine has taken some of the panic pricing — and the speculative piling-on — out of the wheat market.

Yes, but: The U.S. drought still matters, especially to farmers in the deep South and West.

• Cotton farmers in hard-hit areas such as Texas are expected to walk away from more than 12 million acres of previously planted fields for lack of moisture, the Wall Street Journal reports.
• The canned tomato crop in California is getting crushed, Bloomberg reports. The state's almond harvest is expected to be down by 11%.
• Ranchers throughout the plains are selling off cattle due to limited forage because of drought, CNN says.

What we're watching: The weather, with few signs of relief on the horizon.

• The government's excellent drought.gov forecasts page says "most of the Lower 48 should be drier than normal" in the coming days.