The Drought Returns

Despite the record amount of rainfall Missouri has experienced this past spring, the recent heat and lack of precipitation has the area in a drought.  According to the United States Department of Agriculture, Iowa, Illinois, and Missouri are currently in a “flash drought.”  A flash drought is defined by high temperatures, cloudy days, low humidity, and high evapotranspiration rates along with lack of rainfall. This all coincides poorly with the stages of corn and soybeans.  Driving around it is obvious that these crops are nearing physiological maturity and this correlates with grain fill.  Lack of moisture at this crucial time simply means yield will be reduced.  This is ironic because of the growing conditions we had this spring which led farmers and speculators to foresee a record yields.  However, currently producers are becoming uneasy with the recent environmental factors and the current market prices.  Farmers don’t see the record yields that the speculators do and therefor believe that prices should be higher.  It is early to tell what yields will actually be, but some early reports are leaving some people optimistic.  I have heard of yields that range from 70 to 189 bushels per acre.  Not only is this a concern, but a lot of acres in Iowa didn’t get planted because of the rain.  This leads us back to the current flash drought and the effects it leaves on the acres were planted before the rains and had good growing conditions.  I find this interesting because we had an excess rainfall which led us to recoup moisture lost in the 2012 growing season. Flash forward to now and we are experiencing a lack of moisture when we really need it and what is funny is that this all happened in one growing season.   I am curious to see how the markets follow the yields as they come in this harvest season.  Do any of you have a prediction? Will the markets be volatile?

midwest_dm