It has never been this dry in the western United States in 2 decades. This shows weather maps that give an idea of the moisture supply. At the same time, farmers in the eastern states have to deal with excessive precipitation. What consequences does this have for crop development?
While European grains enjoy sun and moisture, the weather in the United States is more extreme. The 'corn belt' experiences extremely dry conditions. Further towards the west coast, the problems only increase further. The weather forecast for the next 14 days is crucial. Not only for crop developments, but also for the grain market. This weather market is characterized by erratic developments.
Rain or not
The bears point to the weather forecast that announces rain. At the same time, bulls think that the predicted rain will not fall, just as it did not happen in recent weeks. Under pressure from the latest Wasde report, the US futures markets for soy, corn and wheat closed lower last Friday, June 11. The weather also plays a role in this.
The Corn Belt refers to an agricultural area in the Midwest that spans 9 states and sometimes as many as 15. More than half of all American grain corn is grown in 4 of these states. The total area, where corn and soy are the two main crops, covers 2 million square kilometers. It is therefore not surprising that the weather varies enormously. The second half of June promises dry weather for the western states and rain towards the end of the month. The east has already had much more rain and that is also planned for the next 1 days. The precipitation at the end of the month may be much needed, because another hot and dry period is expected at the beginning of July.
Soil stock
The weather forecasts keep arable farmers and stock exchange traders busy. Not surprising because at this stage of the season there is a real weather market. Soil moisture reserves are very low in some states such as Iowa. If not enough rain falls, this has a major impact on crop development. Because the corn is not yet fully developed, this scenario mainly occurs at the end of June and the beginning of July. Locally, due to recent heat, it is already visible that corn crops are having a hard time. Parallels are drawn with the also extremely dry 2012, when it remained dry all summer. It is uncertain whether that will also be the case this year.
The bears had the upper hand late last week. The net long position on corn decreased. In particular, a combination of lower temperatures and a reasonable chance of precipitation ensure that the expectations for corn are improving. In addition, President Joe Biden is – according to rumors – working on amending legislation regarding the blending of biofuel. Less ethanol means less corn is needed
Second dust bowl
At the same time, the southwest of the US is experiencing a 'megadrought', as the Americans describe it. Nevada, New Mexico and California have not been this dry in 2 decades. These are states that are used to a precipitation shortage, but satellite images show that the shortages are extreme. 2020 was a relatively good year for the Southwest. Only 4% of the land area suffered from water shortages. This spring it is already 60%. Farmers fear a second 'dust bowl', like the one that gripped North America in the 30s.