(FORTUNE Magazine) – No Easterner who has tried to plan a picnic lately or to get in two days in a row at the beach needs to be told the drought is over. But while soggy weather has dampened weekends, it's been pretty good for farmers -- and not bad for consumers. Bumper grain harvests will produce another year of high farm income in 1990, even though farmers will get less per bushel. At supermarkets the rapid rise of prices is over, and some food products will even get cheaper. In the past 12 months retail food prices soared 6.5%, 1.5 percentage points more than consumer prices as a whole. Not only did the drought cut grain and soybean yields sharply, but cold snaps in Mexico and Florida last spring clobbered vegetables as well. Tomato prices hit a record high in May, up 50% from a year earlier. For the rest of 1989, though, food prices will rise at an annual rate of only 3% -- well below inflation. Red meats, poultry, and fresh vegetables will actually decline on a seasonally adjusted basis. Next year food prices will continue to trail inflation, increasing at an annual rate of 4.5%, vs. 5.8% or so for all consumer prices. Processing and marketing costs -- wages, transportation, packaging, advertising, and the like -- will account for all of the rise. This year's harvest should be a humdinger. Farmers planted about 15 million more acres than last year, and timely rains and seasonably cool temperatures in important growing regions should produce substantially bigger yields. Based on its midsummer report, which reflects field surveys through August 1, the Department of Agriculture foresees a 37% increase in grain production. (Corn, the No. 1 U.S. crop in tonnage and dollars, should be up 49%. Wheat will rise 13%, sorghum 15%, barley 35%, and oats 74%.) Soybeans will be up 24%. Good as those numbers are, they might have been still better without all that picnic-dousing rain in the eastern half of the U.S. With many of their fields turned into lakes, farmers couldn't do the necessary cultivation early in the growing season. Some crops rotted in standing water. Equally damaging, pockets of dryness may nip the spring wheat crop in the northern Great Plains and cut back the harvest in the western Corn Belt. If hot, dry weather persists in those areas for the rest of the summer, yields could slip. Through the end of next year, crop prices will stay below the drought- inflated levels of a year ago. In July corn was down 11%, soybeans were off 21%, and oats plunged 42%. Overall, prices could drop 5% in the last half of 1989, though for the year as a whole they will be up about 7% over 1988, when they were a fat 18% above 1987. With such a large harvest, prices might have been expected to fall even more. But farmers took advantage of last year's inflated prices to sell off much of their surplus. Grain supplies left over from last season are down about 50% from the year before. Judging by the futures markets, however, next year's prices will fall 4% as perhaps two million to three million acres are brought back into production.

For the first time in four years, U.S. grain exports will drop -- by an estimated 8% -- and the U.S. share of the world grain trade will fall. Last year's drought affected most of the Western Hemisphere; this year the globe is awash in grain. Production in such major exporting nations as Argentina and Canada will rise sharply from last year's drought-reduced levels. Major importing countries like the Soviet Union and the People's Republic of China expect good harvests, enabling them to buy less grain abroad. In the U.S., domestic grain consumption should rise somewhat as livestock production expands. NOBODY IN THE U.S. made any money on hogs or cattle last year because feed prices got so high. Poultry producers, however, made up for increased feed costs because demand from health-conscious consumers kept retail prices of chicken high. Poultry production will rise about 6% this year, continuing a long upward trend caused by growing consumer preference for white meat over red. Total meat output will be up only 1% this year because beef is down sharply. Next year meat production should increase about 2% or so, but all the growth will come in poultry. Hog farmers might produce a little less early next year, but with lower feed costs they may well increase production in the second half. For all of 1990, pork output will not change much. Beef production will decline some as cattlemen withhold breeding stock from the market in order to rebuild their herds. Livestock prices will change little before October, when they will start to decline slightly toward their low for the year. They will inch up a bit in 1990. Trends in the futures markets indicate that cattle prices will peak at about 75 cents a pound in early spring, near the current level, and then retreat once more. Hogs, on the other hand, will top out at 46 cents a pound early next summer, just about where they are now, and then fall. Counting poultry, milk products, and eggs, livestock prices will be up about 4% this year, vs. a 3% increase in 1988. Next year they'll drop about 1%. For farmers the recovery should continue. Net cash income will be around $57 billion this year. That's down from last year's drought-driven $60 billion but equal to the total for 1987, when the rebound took hold. Last year's record income included $14.5 billion in direct government payments, which were swelled by some $4.5 billion in drought relief. This year the government will contribute about $11 billion. Income should hold steady next year. Receipts will fall because of lower crop prices, but government payments will come in a little higher. The President has just signed another disaster relief measure that is even broader than last year's. It pays farmers whose crops are damaged by drought, frost, or flooding -- which just about covers the woes that can befall a tiller of the soil. Disaster payments will add about $900 million to farm income over this year and next. Expenses, such as feed for livestock, could be lower. Farmers should be feeling pretty confident -- and they are. Flush with cash from 1988, they are replacing worn-out equipment and buying bigger, more powerful tractors so that they can plant more acreage. But they won't go overboard. They still remember what happened in the heady days of the early 1980s. Eager to cash in on what they saw as an ever-growing export market, farmers planted ''fence to fence,'' borrowing heavily to do it. When export markets faded, many went bust. They'll be conservative this time, just like city folks always said they were.

BOX: OVERVIEW -- Farm income will remain high this year and through 1990. -- Retail food prices will stop climbing so fast, and some will actually fall. -- In the rest of the economy, inflation will accelerate.

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: RETAIL FOOD PRICES HEADING FOR THE SKY There's no drought-stunted corn in Story County, Iowa, this year. Bountiful harvests will help slow the rise of food prices.

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: END OF THE SURGE Crop prices are heading down sharply because of increased production. Prices of livestock, however, won't change much.