Initial reaction from analysts is that dry winds off the Gobi Desert kicked up toward the end of March and have begun to deplete the soil moisture content in the western regions of China. With China becoming a net importer of agricultural commodities just this year, the political ramifications of not feeding their people would be severe - think North Korea. As we all know, the Chinese will not let that happen.
At the end of trading yesterday at the Chicago Mercantile Exchange (CME), a July futures contract could be bought for about $4.01 per cubic foot (about the amount of debris-free topsoil that can fit in a standard metal trash can). This morning (at about 2am gmt), the same contract hit $11.04. This near tripling of contract prices could have a crippling effect on the competitiveness of the American farmer.
Last year, U.S. farmers imported 27,400,000 metric tons of a lesser grade of topsoil from Canada and Central America (mostly Guatemala). If for some reason, the Chinese bid these contracts even higher, it could become economically viable for both of these trading partners to begin shipping their excess topsoil to China directly. Analysts believe that if the price hits $16-17 per contract, US farmers would find it more profitable to dig up their farms and export the top layer of soil.
With increased Midwest grain plantings turning to ethanol production (needs a lesser, siltier grade of topsoil), there is a very real possibility that there will not be enough high-grade Sweet Iowa Loam to cover American food production/consumption. Although no analyst is predicting this today, it is possible that we might become a net importer of food. More than likely, imported from China. Knowing the Chinese record of safety, I find this scenario chilling.
If Washington doesn't intervene (and when was the last time they did that for the average American), we can expect to find much higher prices on our grocery aisle. A $6 gallon of milk or $4 loaf of bread is not out of the question - not to mention the dramatic rise in fossil fuel consumption to ship this Chinese bread to your local grocer.
Long-term this could very well be the last nail in the coffin of the American farmer. Those rows of corn you see as you drive around today, may not be there on this day next year.
[UPDATE: TREAS SEC MNUCHIN TO ADDRESS PANIC AT 8AM EASTERN. WILL TRUMP FOLLOW?]