Corn futures rose the most in almost two weeks and soybeans gained on speculation that the recent Midwest heat wave will mean smaller production than the record crops predicted today by the government.
August has gotten off to the second-warmest start since 1960, T-Storm Weather LLC said today in a report. Another forecaster, Commodity Weather Group LLC, said about 25 percent of the U.S. soybean-growing area won’t get enough rain for proper plant development over the next two weeks, and that the dryness could harm a third of the Midwest should rain miss sections of Illinois this weekend, as expected.
“The crops are going downhill rapidly in parts of the Midwest and South,” said Mark Schultz, the chief analyst for Northstar Commodity Investment Co. in Minneapolis. “Our farmers are already preparing for corn yields that may fall 5 percent to as much as 10 percent from earlier field samples.”
Update: Current temperatures. They are still rising fast. If this keeps up for a few more days I'd say yields will get hammered.
Two hypotheses:
ReplyDelete1. High temperatures may not necessarily be bad if the ground has sufficient moisture. It's the lack of moisture created by high temperatures that matters (rapid evaporation), not the temperature itself, per se.
2. At this point, the weather may matter more for the beans (which were planted later and are still at an earlier, critical stage of development) than for the corn.
Jeff,
ReplyDelete1. May be true on a very small scale, but we couldn't detect a significant interaction between moisture and extreme heat using what I think are the best weather data going. I think that's because on a broad scale (size of a county or so), extreme heat generally means little moisture.
2. This makes sense and you may be right. But empirically, we find about the same damaging effect from extreme heat in August as July for corn. And it looks like the markets agree with us: Corn went up 1.3 percent yesterday, just a little less than the 1.5 percent that soybeans went up. (Substitution possibilities do cloud the market comparison a bit.)