Iowa Public Television


Weather, Supply/Demand Fundamentals Drive Markets

posted on July 26, 2002

Adding insult to injury ranchers and farmers in many parts of the drought-stricken west are reporting serious grasshopper infestations. To be sure it has not been a good year for agriculture in at least some parts of farm country.

The reports of weather stress have prodded markets higher. And while there are other underlying fundamentals behind the price rises, the weather remains the single biggest factor, affecting markets on a daily basis.


Weather, Supply/Demand Fundamentals Drive Markets

Markets pulled back Thursday from multi-year highs on news of rains in the western Corn Belt. But weather worries remain in corn and bean country, as well as in the trading pits. The outlook is for hot dry weather to continue. The condition of grain and oilseed crops is already stressed.

As the harvest for the winter wheat crop winds up projections are it will be the worst in 30 years. The spring wheat crop is reported to be just as stressed. While still developing, fifty eight percent of the U.S. corn crop and forty seven percent of the soybean crop is rated as no better than fair.

A late spring lowered expectations for this year's grain and oilseed crops. Almost as the seed entered the ground, prices for corn and soybeans began to climb. Since planting the August corn futures contract has gained nearly 30 percent. Since June first the soybean contract has surged by more than 20 percent.

Weather aside there are also other market fundamentals at play. Export demand for grain and oilseeds has been strengthening. A weaker dollar prices American grain more competitively and lends support to export sales.


Tags: agriculture corn markets news weather