In many weather markets there are drought-busting rains that stabilize yields and, in some cases, allow them to rebound. This year we have seen multiple rains events pass over the entire US growing region and register minimal rain amounts across a wide portion of the US growing belt. Even if conditions do stabilize, the crops will still be in a precarious position, especially corn, which is entering an important pre-pollination development stage.
The precipitation maps for the past 72 hours show that much of Illinois and Indiana have received little or no rain, and approximately half of Iowa saw an inch or below and the other half less than ½ inch. The corn crop could be close to being irreparably damaged. The soybean crop has more time, as it can be resuscitated with a couple of broad-based rain events of greater than 1 ½ inches.
In the end, it appears that that the chances of achieving the high-end estimates for this year’s US corn and soybean production capacity have all but disappeared.
The coming week could be pivotal for the corn crop. The maps show decent rain coverage over most of Iowa with lighter amounts in Illinois and Indiana. The sheer breadth of the area involved seems to justify the hard setbacks the markets experienced at the end of this week. With the exchange expanding trading limits, volatility was allowed to expand as well. That and the expanding margins can exhaust speculative traders and send them to the sidelines.
Corn and soybeans gave back a good portion of their weather premium this week, but they will face a severe test from the US crop conditions report on Monday afternoon. With pollination approaching, we expect corn to exhibit more volatility than soybeans. Furthermore, with the soybean crop’s capacity to recover, it may have a greater potential to extend its downside move. If we see a repeat of this week’s weather pattern in the coming week and a further deterioration in crop conditions, corn prices could explode.
Previous Weather Markets
A recent article from Reuters suggested the current corn crop is in the worst shape since 1992. Other analysts have indicated the current year might closely resemble 2012.
December 1992 Corn reached its peak on June 9 of that year after rallying 11% (28 ¼ cents) off the low on May 1. In contrast, the rally this year from May to June was a whopping 28% (for a gain of $1.39). December 1992 Corn fell 25% (70 1/4 cents) from the June 9 high to its low on November 19.
In 2012 December Corn bottomed out in late June and then rallied $3.50 over the next 35 days.
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Originally Published June 23, 2023
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