Corn and soybean prices rose sharply this week as the market began assessing the damage that hot, dry weather could be doing to the crops. Much of the Midwest has received less than half of typical rainfall over the last two months, putting stress on growing crops. On Monday night, the USDA downgraded the quality of corn and soybean crops, rating only around 60 percent of the corn and soybean crop as good or excellent.
Corn is especially sensitive to dry conditions, as it needs moisture during its critical pollination stage, which is beginning across the Midwest now. Analysts warn that continued hot and dry conditions could endanger the record harvest that the USDA had projected for this fall.
Although most of the Midwest saw some rain over the last week, it was not enough to break the drought, leaving large portions of Indiana, Illinois, and Missouri in severe drought condition. With little rain forecasted over the next two weeks, prices continued pushing higher through weeks' end.
By midday Friday, November soybeans had climbed 62 cents per bushel (+5 percent) to $13.76, while December corn had popped 53 cents (+10 percent) to $5.59.
Wheat Needs a Drink Too
Wheat prices strengthened this week as well, since little precipitation fell across drought-stricken regions of major wheat-producing nations. Severe-to-extreme drought conditions were reported in China, Ukraine, and Russia. Although the USDA projects that world production should be more than sufficient to meet global demand, many traders are particularly sensitive to weather-related news out of Russia, where drought and wildfire caused world wheat prices to explode almost 100 percent in 2010.
Wheat futures rose as much as 74 cents (+12 percent) this week, with the July contract hitting $6.84 per bushel Friday morning. Although half of the U.S. winter wheat crop has already been harvested this year, much of the world's crop is still at risk. If weather problems continue in Europe, some U.S. producers expect to see prices pierce $7.00 per bushel, and even challenge the $8.00 level seen in 2010 and 2011.