Over the summer, drought worries are often common across the Midwest. Dry weather has started to creep into portions of Iowa and Illinois, but the markets haven’t seemed to notice.
Based on the June 25 map from the United States Drought Monitor, portions of western Iowa, southern Illinois and southwestern Missouri are labeled abnormally dry. However, plentiful rains in the other portions of those states have erased most concerns for futures prices.
“There is still time,” Mike Zuzolo of Global Commodity Analytics said. “We see demand steadily rebuilding, but we still are taking a big enough big in demand that weather fears that would normally encourage long positions are not strong enough for them to stay. The weather bulls are running for cover.”
Zuzolo said the weather models heading into July turned wetter, which also is leading to trepidation for prices. He said the crop conditions for corn and soybeans, which are strong overall as June closes, are the biggest limiting factor for futures.
The biggest factor that could help U.S. prices is issues across the globe.
“We need supply cuts from other areas of the world,” Zuzolo said.
He said if there are no changes from where the crop stands, meaning no weather issues or major upticks in demand, prices could fall back to the lows made in the spring.
Wheat prices have been acting independently of corn and soybeans as the harvest is well underway in southern Illinois and Missouri. Prices broke down in mid-July due to better-than-expected yields, Zuzolo said, but as harvests move north, prices are creeping higher.
“As we started to see the custom harvesters move up toward western Kansas, Nebraska and Colorado, yields are starting to fall from anywhere to a third or half,” Zuzolo said. “I talked with one wheat elevator today in Ohio and a client in Indiana, and all of them are worried about what kind of freeze damage they are going to see in their soft red wheat crop from earlier this spring.”