Farmers in the U.S. are less likely to feel the pinch because about 85 percent of crops are insured, said Steve Hatz, a senior vice president and regional manager of the agribusiness unit of San Francisco-based Bank of the West, the second-biggest U.S. agricultural lender after Wells Fargo & Co.

President Obama announced $30 million in aid to farmers and ranchers on Aug. 7, mostly to get more water to livestock and rehabilitate scorched land.

U.S. net farm income, based on USDA estimates in February, was set to slip this year to $91.7 billion, second only to last year's all-time high of $98.1 billion. The agency is scheduled to update its forecast on Aug. 28.

Spreading Drought

The price of corn fell 1.8 percent in the first half of 2012 as farmers sowed the most acres since 1937. The USDA had rated 77 percent of the crop in good or excellent condition on May 18, and by June 15, futures on the CBOT were down 22 percent for the year. As the drought spread during the past seven weeks, the grain has surged 63 percent. The U.S. agency rated 23 percent of the crop as good or excellent on Aug. 3, the lowest proportion since 1988.

The USDA probably will pare its corn-crop forecast by 16 percent to 10.929 billion bushels, the lowest in six years, from last month's estimate of 12.97 billion, according to the average of 29 analyst estimates compiled by Bloomberg. The soybean forecast probably will be cut to a five-year low of 2.796 billion bushels.

The London-based International Grains Council reduced its global grain production forecast on July 26 to 1.81 billion tons, from a prior estimate of 1.868 billion. While it expects 4 million tons more rice, any gains will be eclipsed by the 36 million-ton slump in supply of wheat and so-called coarse grains.

Indian Monsoon

Wheat production in Russia, the fourth-largest exporter, will decline 20 percent this year, and in Australia, output will fall 19 percent, the council said.

India's monsoon, which accounts for more than 70 percent of annual rainfall, was 17 percent below the 50-year average since June 1, the nation's weather bureau said Aug. 6. The government extended a ban on exports of sugar, rice and wheat in 2009 after the weakest monsoon in almost four decades. The UN's Food & Agriculture Organization cut its global rice-production estimate by 1.1 percent on Aug. 6 because of the monsoon.

U.S. livestock producers are being hurt again less than a year after drought caused a record $7.62 billion in farm losses in Texas, the biggest cattle-producing state. The domestic herd shrank to 97.8 million head by July 1, the smallest for that time of year since at least 1973. Ranchers lost $260 a head in June, from a $156 loss a year earlier, said Ron Plain, a livestock economist at the University of Missouri in Columbia.

U.S. beef supplies are already forecast by the USDA to decline 4.4 percent this year to 11.469 million tons, the lowest since 2005. U.S. retail-beef prices rose to a record $4.709 a pound in June, USDA data show.

Rising Incomes