There is going to be a very large decrease in U.S. corn and soybean production due to extensive drought.

The challenge will be stretching available supplies to meet demand.

Neil Townsend is the CWB's Director of Market Research and says currently the usage in 2011-12 exceeds, for both corn and soybeans, the total supply of each of those crops. Part of the demand comes from legislated amounts of ethanol in fuel, which was not in place in previous drought years and that demand, Townsend says is pretty static, that is, it's not going to change unless there's changes in legislation requiring it.

A large South American crop during the first quarter of 2013 would help, but Townsend says the U.S. can't afford back-to-back droughts in the prime corn and soybean growing regions.

Townsend figures the prices for canola and wheat should be pretty strong in the coming months. He figures canola has a good chance of being above $650 dollars at some point. He says wheat prices are a little bit harder to predict because a lot of what happens depends on off shore buyers, but he doesn't figure the price will decline significantly from the $9 a bushel Minneapolis wheat price. And corn, which is at about $8.20 right now has a good chance of, at some point, hitting $9 and then that would push wheat up accordingly. Townsend says that should mean $10 wheat before it goes down.