After weeks of no rain and hot temperatures the D word has finally surfaced. Much of the Corn Belt, especially the eastern portion, has seen drought conditions develop. Of course some scattered mid-week rains have provided some relief, but it's really just a start.
Futures market has been building in a shortened crop as prices have moved higher. According to reports from the World Agricultural Supply and Demand Estimates and the National Agricultural Statistics Service, crop estimates have declined by three bushels per acre and crop conditions are suffering compared with June.
In its July 12 report, WASDE dropped its projected bushels from 148 bushels per acre in June to 145 bushels. Word is that the futures market has tempered its expectations to 135 bushels per acre. WASDE cut its 2005/2006 estimated corn production by 200 million bushels to 10.785 million bushels. In its July 19 report, NASS changed its crop condition report to reflect that 6 percent of the corn crop is in very poor condition compared to 1 percent in June. The percentage now considered to be in poor shape is 13 percent today versus 5 percent in June.
The western Corn Belt had been in good shape, but has faced a three to four week dry spell, along with some hot temperatures. The key is that the hot, dry weather is coming at a critical time– pollination.
"If you don't get pollination, you don't get kernels," notes Glenn Grimes, Unversity of Missouri agricultural economist. He points out that with current high usage rates, and future growth in usage, it doesn't take as much of a crop decline to create a tight supply as it used to.
He suggests that pork producers start looking at feedgrain options to cover their needs.