The dreaded “d-word” is raising concerns throughout the Corn Belt following the release of the National Weather Service’s latest Seasonal Drought Outlook late last week. A large portion of the region is expected to be dominated by a stubborn, persistent drought through the end of September, increasing crop yield concerns and sending corn and soybean prices skyward.
“The maps just keep getting worse and worse,” U.S. Commodities trader Don Roose told the Des Moines Register.
In the Drought Outlook map, much of Nebraska, Kansas, Iowa, Missouri, Illinois and Indiana are covered in brown or yellow, indicated developing or persisting drought conditions. Parts of Michigan, Ohio, Kentucky, Tennessee, Mississippi, Arkansas and Oklahoma are also expected to be touched by the drought. See the map here.
There is some hope for drought relief just in time for harvest. Earlier this month, the U.S. Climate Prediction Center indicated a 50 percent likelihood that El Niño would develop, though conditions are still expected to be neutral between June and August. Last Year’s drought was partially blamed on La Niña.
A developing El Niño is more likely to push drought conditions to the west, away from the Corn Belt, allowing weak storm fronts into the Midwest grain growing region. Read more here.
On Monday morning corn jumped more than 4 percent to four-month highs on supply concerns related the intensifying drought conditions. Reuters reported that corn led gains on threats to the harvest of the world’s top corn supplier at a time when the global market is relying on a bumper crop to replenish tight stocks. The U.S. corn stockpile is projected to gall to a 16-year low by August 31. By midday corn futures were 32 to 40 cents higher.
The USDA’s corn yield forecast this year remains at 166 bushels per acre, though some private forecasters have predicted a national yield below 160 bushels per acre.
“We could probably take the yield down to 155 to 156 bushels per acre and have adequate stocks, but below that we’ll be into rationing and prices could go higher,” Roose said.
Last year the U.S. averaged 148 bushels per acre.