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Drought persists despite rains, weather premiums hold

posted on May 12, 2000


NOT SURPASSINGLY THOSE PROJECTIONS OF BUMPER CROPS CARRY WITH THEM ESTIMATES OF LOWER COMMODITY PRICES. THE USDA EXPECTS DEMAND TO REMAIN RELATIVELY STABLE, CUTTING ITS ESTIMATE FOR CORN EXPORTS BY 25 MILLION BUSHELS, INCREASING PROJECTED SOYBEAN EXPORTS BY 10 MILLION BUSHELS. THE GOVERNMENT ALSO RAISED ITS ESTIMATE OF DOMESTIC WHEAT CONSUMPTION BY 5 MILLION BUSHELS.

BUT ALL THOSE GUESSES ARE PREDICATED ON PRODUCTION OF A CROP THAT IS BARELY IN THE GROUND. AND WHILE MARKETS ON FRIDAY CLOSED OFF A BIT, A "WEATHER PREMIUM" REMAINS A PART OF THE PRICE OF CROPS YET TO BE.

RAINS THIS WEEK HELPED TO MAINTAIN SOIL CONDITIONS, BUT MUCH OF THE MIDWEST STILL LACKS SUBSOIL MOISTURE. LARGE PORTIONS OF THE MAJOR CORN AND BEAN GROWING STATES HAVE RECEIVED ONLY 50 TO 75 PERCENT OF NORMAL RAINFALL IN THE PAST MONTH. THE PALMER INDEX, WHICH MEASURES LONG TERM MOISTURE TRENDS, SHOWS MUCH OF THE MIDWEST IS IN NEED OF ABOVE NORMAL RAINFALL TO MAKE UP FOR DEFICITS INCURRED SINCE THE FALL OF LAST YEAR.

THE MARKETS SEEM TO HAVE EYES FOR THE DROUGHT AS WELL.

DESPITE WIDESPREAD RAINS, CORN PRICES HAVE HELD MOSTLY STEADY, MAINTAINING THE GAINS MADE FROM DROUGHT CONCERNS SINCE THE BEGINNING OF THE YEAR. SOYBEANS, WHICH ARE MORE SENSITIVE TO LACK OF MOISTURE THAN CORN, HAVE CONTINUED TO BECOME A MORE VALUABLE COMMODITY AS WELL.

ALSO HELPING TO BUOY PRICES IS OPTIMISM OVER TRADE. CURRENT AND PROSPECTIVE EXPORTS TO ASIAN NATIONS SEEM TO HAVE HELPED MAINTAIN CURRENT COMMODITIES VALUES. IF CONGRESS PASSES A MEASURE LATER THIS MONTH GRANTING PERMANENT NORMAL TRADE STATUS TO CHINA, EXPORT CHATTER MAY OVERTAKE WEATHER WOES AS THE DRIVING FORCE BEHIND THE MARKETS.

NEXT WEEK PRESIDENT CLINTON ALONG WITH AGRICULTURE SECRETARY GLICKMAN WILL TRAVEL TO CONGRESSIONAL DISTRICTS IN OHIO AND MINNESOTA TO WOO LAWMAKERS WHO REMAIN UNDECIDED ON THE QUESTION OF WHETHER TO NORMALIZE TRADE RELATIONS WITH CHINA.

WHILE THE ADMINISTRATION IS FIRMLY BEHIND NORMALIZATION LAWMAKERS BOTH REPUBLICAN AND DEMOCRAT REMAIN UNCOMMITTED.

DRIVEN BY THE PROSPECT OF AN ADDITIONAL TWO BILLION DOLLARS WORTH OF ANNUAL FARM EXPORTS, MEMBERS OF TRADE ASSOCIATIONS LIKE THE NATIONAL CORN GROWERS AND THE AMERICAN SOYBEAN ASSOCIATION ARE ALSO LOBBYING HARD FOR NORMALIZATION. THE VOTE SCHEDULED THE WEEK OF MAY 21 IN THE HOUSE OF REPRESENTATIVES REMAINS TOO CLOSE TO CALL.

Tags: agriculture crops drought news oil weather