Markets react to drought, USDA reports
As the grain markets absorb the realities of a serious drought hitting the Corn Belt, prices have skyrocketed in the trade with corn prices rising the limit on several days of trading.
Corn was trading well over $7 a bushel and soybeans were up to over $15.50 as experts fear the effects of the ongoing drought and high temperatures will cut into grain production.
In March the U.S. Department of Agriculture (USDA) had estimated this year's corn crop would come in at a yield of 165 bushels per acre and soybeans would make 44 bushels per acre.
But traders believe that the excessive heat that gripped much of the grain-producing region and drought in many of those same areas will pare those yields.
The USDA reported that soybean stocks will likely drop to a 15-year low by August or September and a short crop yield will drive prices for that crop higher.
Price for both crops have been at record levels since the middle of 2010.
As the drought continues, various market analysts are competing to come out with forecasts of this year's grain harvest, based on weather forecasts and the stages of corn development - mainly pollination.
The market waited nervously for a USDA update of expected yields for this year and surplus stocks that was due to be issued Wednesday, July 11 (too late for Wisconsin State Farmer's press deadline.)
Last year the U.S. corn average was 148 bushels per acre, led by Iowa's top production of 172 bushels per acre.
In the spring, as planting intentions became known, the USDA had predicted this would be a record-setting year for corn and soybean production, but drought and high temperatures have cut into that prediction.
On Monday (July 9) the USDA said 40 percent of the nation's corn crop was in good-to-excellent condition. That was a drop of eight percentage points from a week earlier and 16 percentage points from the week before that.
The USDA crop reports have documented the effects of last week's heat and the ongoing drought in major grain-producing areas and contributed to the hike in commodity prices.
Many traders and commodity experts are now comparing this year to the 1988 drought - the last major drought to hit the Corn Belt.
As farmers join commodity traders in watching the weather forecasts and looking for rain, seven-day forecasts are not showing much moisture.
But with temperatures showing more moderation and traders paring risk before Wednesday's crop report, the price of corn futures dropped a little on Tuesday. December corn was down 14 cents to $7.16 a bushel.
Weather forecasts on Tuesday (July 10) showed the possibility of rain in some drought-stricken Corn Belt regions and that made some grain traders more cautious on the price of corn.
Still, it is now a seriously weather-driven market. The National Weather Service forecasts above-average temperatures in most of the Corn Belt for next week.
The service said chances for rain were below average in Iowa and Minnesota while chances were "normal" for parts of the Corn Belt east and further south.