Weather continues to be a main theme in the grain markets, as well as the global economy.
High hopes and prayers for rain this week were answered for some farmers, but not for others. This week’s Drought Monitor Index shows that out of the 18 major corn-growing states, only a few aren’t suffering from abnormally dry or drought conditions.
Isolated showers fell on parts of the Plains, but May will still go down as a very dry month across large sections of the central and southern Plains, according to USDA's Joint Ag Weather Facility
. Many of the area’s summer crops and maturing winter wheat are under increasing levels of stress.
In the Corn Belt, cool weather prevailed at the end of the week, in the wake of a departing cold front. A few showers lingered across the eastern Corn Belt, where recent rains have benefited corn, soybeans, and winter wheat, but have not completely eradicated short-term dryness
Looking forward, the National Weather Services is predicting warmer- and drier-than-normal weather across the majority of the U.S. for June 6-10.
Several weather experts have come out and said they are really concerned about the crop this summer, says Jerry Gulke, president of the Gulke Group. "After the limited rainfall that came through this week, there’s not much rain in the forecast for the next 10 days."
With a lack of rain and declining crop condition ratings, Gulke says you would expect that markets would surge in light of a reduced supply. But, that wasn’t the case this week.
July 2012 corn closed at $5.56 on Friday, nearly a dime off the high, and September 2012 corn dropped to $5.16. Soybeans didn’t finish the week much better, with July beans up a few cents and September beans falling to $12.84. See the market movement charts
for the week.
Gulke says it’s like the market doesn’t care needed rain may not fall. "It’s saying ‘Jerry I don’t care what type of crop you’re going to get. The demand won’t be there to eat whatever you produce.’ That’s really a scary situation."
Global Concerns Heighten
In addition to weather scares, Gulke says the markets are also volatile due to the global economy.
"The European situation is getting worse, and that could spread to the United States and China."
He says during the last few months, a systemic change in the outlook of attitudes about agriculture has taken place. The lure of high commodity prices has seduced a lot of farmers, in the U.S. and around the globe, to increase acreage.
Ideally, Gulke says, we could hold global demand stable. "But, if global demand would begin to shrink, in an atmosphere of us producing more acres around the world that would be a recipe for disaster. We are beginning to see this unfold."
Listen to Gulke's full analysis:
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