Beginning early June, heavily rainfall flooded parts of northern Iowa and
southern Wisconsin at a time when the ground was still soaked from spring rains.
Homes, cities and roads suffered extensive damage. Corn and soybean fields were
hit hard; their future is in serious doubt.
Already this season, farmers were behind with planting due to the wet
conditions. With the additional rain and flooding in parts of Iowa, Wisconsin,
Indiana and other states, corn is taking another hit. Crop conditions as
reported in the USDA's weekly weather and crop bulletin released Tuesday
declined, with only 57% rated as good or excellent - down from 60% the week
before. The real question is what that number is going to be next week
once flooding subsides and the crops can be inspected. If prices lately are any
indication, the market is betting that the quality of corn from these areas will
continue to decline.
Corn (C, CBOT)
Just how many corn acres are affected is anyone's guess - and nobody's
guessing. Most analysts have refrained from flat out saying that the sky is
falling, preferring to wait until field inspections can begin. Experts quoted in
CBOT's "Commodity News for Tomorrow" newsletter dated June 18 have made
back-of-the-envelope estimates of crop loss in the range of 10% to 30% for corn,
and lower ranges for soybeans. The financial impact of these losses is expected
to rise into the hundreds of millions of dollars.
Thus, corn futures, which weren't exactly just lollygagging about this year,
continue to rise.
Even those farmers lucky enough to have avoided the worst of the flooding
will likely see a rise in production costs. Excessive rainfall can cause nitrogen
depletion, necessitating additional application of nitrogen just to keep
yields intact. Perhaps now would be a good time to look into some nitrogen
producers? Those guys have it tough too - nitrogen fertilizer production in the
U.S.
