“US farmers received a warning over the threat of dryness to 2013 crops…”
Well, it seems that United States Department of Agriculture’s (USDA) Friday report shocked traders resulting price jumps in commodity market.
Even though a late rain in Midwest had helped to improve the harvest of grains, especially, the later planted soybeans, farmers of USA have received the warning that the hazardous drought which has destroyed well over 50 percent of the yields can have negative consequences even in next year.
According to crop weather expert Gail Martell at Martell Crop Projections, this year’s dry weather conditions may have negative impacts on 2013 crops too. It is said that the severe drought has caused weakening soil moisture deficits of six–to-nine inches due to the shortage of water over the past three months. It is announced that North-central US is significantly waterless in key corn states Iowa, Nebraska and Minnesota. Also, nearby lands for farming usage is excessively dry in northern Illinois, Wisconsin, Missouri, and eastern parts of South and North Dakota. It is also pointed out that if to put these circumstances into perspective, Iowa will need well over 50 percent of normal rainfall in Fall (October-November) and Spring (until April) to vanish repercussions of the severe drought; as a result to revive the moisture of soil for season 2013.
From my estimation, this forecast has to do with storage which we learnt last week. If it, indeed, is reliable information, it pushes cash prices up because buyers will want to store the crop to sell in future because of a high price expectation, but it will last until arbitrage equals to zero. So, due to this warning, I am expecting that the corn and soybean prices will drive up more.
References:
http://www.agrimoney.com/news/dryness-helps-us-harvest-but-a-risk-to-2013-crops–5026.html
Hi, Gulsana, well done! You’ve done excellent job of analyzing the price trend. If the drought will affect the crop production of 2013, the price in long term will increase. That is very important. We can go long for it. I know that after all these reasons, in long term, the price will eventually rise. However, as the harvesting is still going on, more commodities are available. That will slow down the increasing price of wheat and corn and even reduce the price. After all, harvesting is the main reason for the reducing price last week. On Friday, with the report of USDA was released, the price of wheat and corn increased significantly. This indicates the importance of USDA and how the USDA report can affect the future markets. I think the rising price won’t last for too long. The price will finally reduce after that although maybe on next Monday, the price will continue to rise. Forecasts are putting this year’s grain maize crop at 3.6 million tonnes which would be up by a dramatic 1.2 million tonnes on last year and so provide the local market with a sharply increased volume of feed grain supplies. The prospects of this huge increase in maize production were restraining trade in the market this week. Because corn and wheat are substituted, the price of corn will decrease in long term and it will make the wheat cheaper in long term.