It is hard to reconcile recent price action on the Chicago Board of Trade with the drought maps we see published at various websites.
Spotty rains are not erasing the drought areas on the maps, and worried farmers say that the country may be having a big crop, but it is not happening in their backyard.
Part of the problem for us in Ohio is that we are in the drought area. The entire northeastern U.S. has some level of drought, with the worst being in western New York.
Northeast Ohio is shown on the latest USDA map with moderate drought, although the farmers in North Central Ohio do not consider it drought. Scattered thunderstorms continue to tease the area.
Over the weekend, some areas saw a couple of inches of rain, while most got little or nothing. At my house Sunday night, July 31, we had a big booming thunderstorm, which shook the house, but did not even produce a sprinkle.
Still, Ashtabula County, where I live, is considered the garden spot of Northeast Ohio right now. It is shown on the drought map with a slightly better “abnormally dry” rating, and the crops actually look the best I have ever seen them.
We need rain, but have gotten just enough. Meanwhile, some of the poor soils we are known for have never been too wet. Go just one county south, and you run into drier conditions, although eastern Trumbull County is better than the western part of the county.
From there, the entire grain area of this part of the state is sadly dry, and the drought stretches almost to Toledo. The prices on the Chicago Board would not lead you to believe there is any problem, however.
This is because, once you leave Ohio, Pennsylvania and Michigan, the drought map is clear. Traders on Lasalle Street in Chicago are in the middle of the best weather we have seen for years.
The crops are projected to be huge, and they are killing prices. Overnight we put in new life-of-contract lows in corn and soybeans. December corn futures were $3.73 overnight, with a small bounce $3.34 in early Tuesday trading, Aug. 2.
November soybean futures touched $9.55 overnight before a rebound, if you can call it that, to $9.58 1/2 in early Tuesday trading. Why the continuation to cheaper prices?
Our market letters are telling us that we will have normal to above average temperatures across the region the next two weeks, but the temperatures will be accompanied with the above average precipitation.
That blunts the hot temperatures and actually could create greenhouse conditions which confirm the record crops. Other market indicators point to continued slide in the already cheap prices.
The weekly crop condition ratings are still at 76 percent food and excellent, unchanged for the last four weeks. Corn exports were good, at 1.14 mmt.
Some 72 percent of the soybean crop is now considered good or excellent. That is actually up one percent from last week, and is the second best rating for this week in the past 22 years. The ugliest part of my CHS Hedging report this morning came at the bottom of the first page.
“Friendly weather will continue to drive prices lower.”
This comes after a drop of $1.15 in December corn futures, a drop of $2.28 in November bean futures and a drop of $1.40 in September wheat futures. The wheat prices come from great crops here, even though there are problems in some places in the world.
The French crop is the smallest since 1988. It is 31 percent smaller than last year due to the wettest spring and summer in 50 years.
Now you know where our rain has been falling. The best we can hope for right now in northeast Ohio is that we get some of the rains that are forecast. Cheap prices are not as big a disaster as poor crops.
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