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Corn Crop on Verge of Disaster

July 7, 2012
By: Sara Schafer, Farm Journal Media Business and Crops Editor

This year is starting to look a lot like 1988 in terms of weather. What will that mean for prices?  


Most farmers would rather forget 1988, when drought conditions enveloped the entire Corn Belt. But, this year could look like a repeat.

7 6 12 IL drought cornA farmer from Crawford County, Ill., submitted this photo to AgWeb's Crop Comments. "We have a whole lot of 0's here. This corn was planted May 12, and we've had no rain since planting."


As of this week, the U.S. Drought Monitor showed an overall expansion and intensification of dryness in large sections of the country. Both the number of record highs in the past week and the areas with record and near-record dryness over the last 1 to 3 months, are too numerous to mention, reports Rich Tinker, Climate Prediction Center, NCEP, NWS, NOAA.

Daily high temperatures averaged above 100 degrees in the central and upper southern Plains and average temperatures for the week were 8 to locally 15 degrees above normal from the Ohio Valley and upper Southeast westward through most of the High Plains.

Jerry Gulke, president of the Gulke Group, and his colleagues have recently scouted the crops in parts of North Dakota, Minnesota and Illinois. Some areas are looking good, but overall the majority of crops are showing signs of stress.

In northern Illinois, Gulke says the chance of rain in his area isn’t great for the next 10 days, which will cause even more stress. "Crops in some areas are probably worse than I or the market is giving them credit for. This crop may be on the verge of a real disaster that exceeds 1988, depending on the weather in July and August."

Yet, Gulke says that even though you can’t find any forecaster who says the drought will end soon, things can turn around quickly. "In 1988, the drought was over when we least expected it. We woke up one morning and it was raining."

The Need to Curb Demand

With the likelihood of reduced corn yields, Gulke says demand will need to be reduced. "When you look at the numbers, we’ve got grain prices that will start curbing demand. We’ve got a chance to solve the problem in corn because we can curb exports and ethanol use."

Three weeks ago, Gulke says, the market was expecting significant rains that would have sent corn prices down to $4. Yet for this week, values surged to new contract highs in both corn and soybeans, and now stand at some of the highest levels since 2008. (See this week's price movements.)

How high will prices go?

"There isn’t hardly anyone that doesn’t know there’s a problem in with the U.S. corn crop. The first $2 increase in corn comes pretty easy. The next dollar might be a lot more difficult."

Gulke says corn prices could shoot dramatically higher, as we continue this unprecedented weather market. "We may be underestimating how high the price of corn could go."

Listen to Gulke’s full audio analysis:

Report on the Horizon

Visit AgWeb next week for pre-report analysis and full coverage of the July 11 Crop Production and WASDE reports.


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