Drought continues to pressure corn prices

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Corn prices are up at midday as drought concerns remain firmly entrenched. Some light rain is forecasted for the northern and eastern Corn Belt next week. However, the western Corn Belt is under stress from extreme heat and dryness that’s expected to persist through much of next week. September and December futures are higher, but are holding below the intraday highs posted on Thursday.

Soybean futures are maintaining strong price gains in midday trading. As of 11:00 am CDT soybean futures are trading 24 to 38 cents higher. Soybean futures continued to post double digit gains. The market is currently underpinned by fears of historic yield and production losses associated with the worst drought in over half a century. Forecast maps are offering no hope soon for drought busting rains. Climate experts have estimated that over 65 percent of the Midwest and High Plains are experiencing drought conditions and traders are concerned yield projects could fall far below USDA’s July estimate of 40.5 bushels per acre.

Wheat futures are sharply mixed in midday trade, with all three exchanges showing some contracts slightly lower, some unchanged, and some slightly higher. Profit-taking ahead of the weekend is a factor in the selling, while new buying is still present with yesterday’s National Weather Service forecast that the blistering drought conditions for the Cornbelt will continue through August. There’s also some stress developing for spring wheat in the western edge of the Northern Plains and the August forecast is for more of the same, including below normal moisture for the Pacific NW as well. At midday, spot futures at the CBOT are down 7 ½ cents at $9.27 ½; KCBT spot futures are down 5 ½ at $9.32 ½; and MGE spot futures are unchanged at $10.22.

After the gains earlier this week, cattle prices are under pressure at midday as traders move to the sidelines ahead of several key USDA reports out later this afternoon. The monthly Cattle on Feed report, the mid-year inventory report and Cold Storage will be released this afternoon. Fed cattle are also under pressure from further increases in the corn market and forecasts for excessive heat in the Plains, which could force feedlots to move cattle more aggressively.

Hog prices traded lower much of the morning but have turned higher at midsession after finding support near Thursday’s lows. The charts display a huge upside reversal that occurred on Wednesday upon news that Japan was lifting its curbs on U.S. beef exports and ideas that could lead to tightening supplies of beef domestically, which is always helpful to pork prices … and possibly stir some additional pork sales to Japan as well. Prices broke Thursday, however, on word that drought conditions would persist through August, according to the new 30-day forecast from the National Weather Service. Fear of producer liquidation and reduced farrowing plans on soaring feed costs were a factor. But today, steady cash bids and packer margins have erased early losses. At midday August hogs are up .85 at $93.90, October up .05 at $80.50 and December up .22 ½ at $77.05.



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