Heat and Drought in the Midwest....(6-28-12)
Yesterday we talked about the heat moving east and it was certainly hot in the Ohio Valley but just as important the areas with the extreme heat are seeing drought conditions as well. For example, not only was Indianapolis 105 F on Thursday but they haven’t had measurable rain in 24 days and they have only had .05” for the month of June. Here is the latest drought map for the Midwest. Keep in mind, the data for this map is only throw this past Tuesday and doesn’t include the heat of the last couple of days.The amazing number I take away from the chart above is that last year on this date only 1% of the area in the Midwest was in drought and today that number stands at 71%.there has been a lot of talk about the drought and wildfires in the Rockies and rightly so but the Midwest drought may be stealing the headlines soon. The drought and heat is already having an impact on the corn crop in the heart of the corn belt.With the heat building early this week the prices for corn reached $6.33 a bushel. That crop had the biggest three day climb in prices since 2010. The USDA is reporting that the corn and soybean crops were in their worst shape since the drought of 1988. With the mild spring this year, the largest corn crop since the 1930s was planted but the heat and drought will scale back the yield. Here is a graph that shows the sharp rise in the price of corn. Since early May it looks like prices have gone up 22%It is interesting that the commodity traders are keeping a close eye on the same computer guidance we look at and that can influences the prices. Much of the southern Corn Belt is suffering moderate to severe drought, with portions of Illinois, Indiana and Kentucky in extreme drought. Only scattered showers are possible this week, and those were forecast mostly in the northern part of the region.
Some midday weather models predicted a slightly better chance of rain in the coming days, spurring a modest sell-off that saw corn pare gains and soybeans turn lower. (Reuters)The strain on the corn crop has a ripple effect that extends down to ethanol production. Valero Energy has shut down 2 biofuel refineries already.We may be dry here in central New York but we are no way near the concerns in the Midwest. the drought monitor here in the Northeast shows no drought conditions in central New York as we are only about an inch below normal in rain since the start of the month.
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