Weather market grips Midwest corn and soybean crops

by Ron Sterk
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KANSAS CITY — While talk of a weather market typically refers to the primary growing season of July and August for U.S. corn and soybean crops, this year the weather has taken its toll early, leaving market watchers anxious about what the next two months still have in store.

In addition to the devastation to roads, bridges and property caused by severe flooding in Iowa, southern Wisconsin and parts of Illinois, Indiana and Missouri, potential crop production already has been reduced, trade sources agree. And the stage has been set for further crop losses should conditions turn hot and dry later in the summer.

"Weather over the rest of the growing season will be the most critical factor in determining actual yields, but this year’s crop has gotten off to an unusually bad start," the U.S. Department of Agriculture said in its June 12 Feed Outlook report.

David Salmon, owner of Weather Derivatives, a meteorology forecasting and consulting service near Kansas City, forecast the average U.S. corn yield at 144.3 bus an acre based on U.S.D.A. June 15 crop condition ratings, down from 146.6 bus a week earlier and 149.4 bus two weeks prior. The U.S.D.A. projected the U.S. corn yield at 148.9 bus an acre in its June 10 World Agricultural Supply and Demand Estimates report. Last year the total U.S. crop averaged 151.1 bus an acre.

The U.S.D.A rated the corn crop in the 18 largest producing states as of June 15 at 57% good to excellent, down three percentage points from a week earlier, 31% fair, unchanged for the week, and 12% poor to very poor, up three points. Many in the trade expected a drop of 5 percentage points or more in the good to excellent category.

But individual states saw larger declines in crop ratings. Iowa, which is the nation’s largest corn producing state and often the largest soybean producer, appears to have been the hardest hit by severe weather and flooding. Eighty-three of the state’s 99 counties have been declared disaster areas with only 16 counties in the northwest corner of the state escaping the declaration.

The Iowa corn crop was rated 49% good to excellent, down from 56% a week earlier and compared with 78% at about the same time a year ago, the U.S.D.A. said. Fifteen per cent of the crop was poor to very poor, compared with 10% a week earlier and 4% last year. The soybean crop in Iowa also deteriorated with 49% rated good to excellent, down from 53% a week earlier and compared with 77% a year ago.

The late planting and slow development of the corn crop pushed the key pollination period about two weeks later (into late July-early August) in the Midwest, which is typically a hotter, drier period, Jon Davis, chief meteorologist, Chesapeake Energy Corp., said at the recent Sosland Publishing Company Purchasing Seminar.

"The risk is higher this season," he said.

Mr. Salmon agreed corn pollination in the bulk of the Midwest would be pushed to late July, but he expects generally mild weather conditions, with temperatures "more in the 80s and not in the 100s."

"It’s more likely that we will crank up a big rain event in the Midwest in the first half of July than that the summer will turn hot and dry," Mr. Salmon said.

Late planted and slower developing soybeans also become more vulnerable to late summer weather and early frost. The key period for the soybean crop in the Midwest usually is late July to early August as the crop blooms and sets pods, but those events will be pushed into August in many cases. As of June 15 the soybean crop in the 18 major states was 84% planted and 71% emerged, far behind five-year averages of 94% for planting and 86% for emergence, the U.S.D.A. said.

But again, Mr. Salmon said an early frost was not the most likely scenario.

"If we have a moist summer we usually don’t have an early frost," he said. He added that the lateness means soybean plants will be smaller and yield less.

The first survey-based corn and soybean crop production forecasts will be released by the U.S.D.A. on Aug. 12. Updated planted area estimates will be released in the June 30 Acreage report.

This article can also be found in the digital edition of Food Business News, June 24, 2008, starting on Page 32. Click here to search that archive.

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