“As long as the drought threat remains as large as it is today, new-crop corn prices could stay higher by the risk premium,” he said. “If the drought risk were to be eliminated, then new-crop prices would likely drop.
“The weather threat could be reduced if more rain arrives but can’t be eliminated until next year’s corn growing season reaches mid- to late July.”
So while a return to normal production could mean $5.50-per-bushel corn, Hurt said continued drought in key production states could still translate to new-crop corn prices of $8.50 per bushel.
The uncertainty makes risk-management difficult for corn growers.
“Farmers will have three key tools to deal with the financial risk from this wide range of possible outcomes: federal crop insurance, the new government farm program and their own marketing decisions,” Hurt said.