The World Agricultural Supply and Demand Estimate (WASDE) report released Tuesday revealed that the condition of the nation’s corn crop fell more sharply than expected, dropping 6 points from the previous week.

“Continued dryness in the central, southern and eastern Corn Belt this week could further pressure crop ratings,” says Marty Foreman, Doane  senior economist. “At 66 percent good to excellent, the rating is below the ten-year average at 69 percent.”

Tuesday, the market reacted negatively to the higher than expected ending stocks projections and the possibility of rain in the extended forecast rather than the current dryness, according to Foreman. “Even so, the dryness is becoming increasingly significant. The crop’s moisture demands are increasing and much of the crop is near the stage where ear size is being determined.”

Heat combined with dryness is very stressful for corn and it is nearing a critical period for rainfall. “Stress on the corn plant at the current stage could become a limiting factor for yield,” Foreman says. “The crop can still do well, but timely rainfall will be needed. Fortunately, most areas have avoided extreme heat so far.”

Foreman says that traders’ reaction to the WASDE report was somewhat muted. “The WASDE reports were only mildly surprising. We expected demand items to be revised but anticipated a smaller cut in exports and a larger increase in corn for ethanol,” he said. “More significant revisions may be in store next month depending on the outcome of USDA’s Grain Stocks and Acreage reports on June 29.”