Tuesday, July 17, 2012

Crop situation getting worse

Crop conditions in the US, particularly corn, continue to worsen. The latest data from the USDA puts the percentage of corn crops in "good or excellent" condition at just above 30%.

Percentage of corn crops in "good or excellent" conditions

The only time we've been lower on crop conditions in recent decades was during the 1988 drought (see this link for more background on droughts). However the current drought is by no means over and we may be going considerably below 30% on the chart above.

8-14 day temperature forecast (source: National Weather Service)

The chart below compares conditions to crop yields over time (with 2012/13 added). Based on the current situation, crop yields could easily be down 25% or more.

Source: DB

As the markets recognize this potential size of the supply disruption, prices continue to march higher, with corn hitting another record today.

Nearby corn futures

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