Melvin Brees
Farm Management Specialist
University of Missouri Extension




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June 2, 2000

Is the Drought Over? Ouch!

Although amounts varied, general rains finally fell over many of the dry areas of the Corn Belt. The crop has been planted early and, with the exception of some poor stands, is off to a good start. Some computer yield models, based on crop conditions, planting dates, etc., are already projecting high yields. Yet, only days ago, the major news was drought! Is the drought over?

The grain market prices had been supported by drought concerns. Price weakness began last week on rains forecasted to fall over the coming weekend. Rain had been forecast before with only spotty occurrences and prices usually quickly recovered. This time 1 to 3 inches of rain actually fell and the market collapsed on Monday. In just one week (May 22 to May 28), December corn futures slipped about $0.17 and November soybeans dropped $0.40. The ouch is the sound of those who didn't sell, on higher prices resulting from drought fears, kicking themselves!

While some believe that the weather patterns are changing to a wetter cycle, the potential for drought problems are still there. The topsoil quickly soaked up the weekend and early week rains, but subsoils are still dry. The soybeans are just getting started and corn pollination is still weeks away. Right now, water use is low and May is usually one of the wetter months. More rain will be needed. Summer moisture will still be very critical and many of the long-range forecasts still expect less than normal rainfall. A lot of weather and price action can still happen!

Price weakness is not unusual at this time of year. The seasonal price pattern for both corn and soybeans is for prices to decline in late May to early June--after crops are planted and off to a good start. Following this seasonal decline, weather related price rallies often occur in late June to around the fourth of July--especially if conditions are dry and concerns about pollination increase. While anything can happen, the stage is set for a seasonal weather rally again this year. Market analysts often point out that "markets often give producers two or three opportunities to sell" and it's early in the marketing year. If the early May opportunity was missed, there should be another chance. As the end of June approaches, the markets will likely again focus on crop conditions and weather. The July 4th weekend is often the pivot point during the growing season, be prepared as this approaches.

The rains and the rapid price collapse illustrate how easy it is to miss opportunities. The rains provided temporary relief from the drought, but more will be needed and weather will remain a concern. While production is far from assured, the crops are planted and growing. As production risk decreases, risk of lower prices will increase! Be prepared to take advantage of the next opportunity by selling a rally whenever it occurs. -- Melvin

University of Missouri ExtensionDecisive Marketing - June 2, 2000 -- Revised: April 20, 2004