Analyst: Weather Has Ability to Have Biggest Price Impact

June Weather Markets 061520

The U.S. Drought Monitor still shows signs of dryness in some western areas of the United States. The monitor shows extreme drought in the Colorado and New Mexico regions, too. 

“[It’s getting worse] especially along the border of New Mexico, Colorado, southwest Kansas and parts of Oklahoma and Texas,” says AgDay meteorologist Mike Hoffman. 

The monitor shows hardly any signs of dryness throughout the Midwest, except for areas of South Dakota, Iowa and Minnesota. 

The United States Drought Monitor website says drought is rapidly developing or intensifying across northern and eastern New Mexico. The website says, “In addition, May 2020 was the fifth-warmest May on record, which is likely exacerbating the dryness as a number of wildfires have developed.” 

As far as the Midwest, the Drought Monitor website says, “Southwest Illinois and western Kentucky are beginning to dry out.” 

“Weather is still, in my opinion, and will always be the thing that has the single-biggest impact on prices or at least has the ability to,” says Joe Vaclavik, president and CEO of Standard Grain. 

Vaclavik says the weather events of 2019 happened earlier in the year with plant related issues. In years past, they occurred in June and July. 

“There’s no guarantee that one will occur,” says Vaclavik. It doesn’t have to happen this year. We could go all summer without a crop issue or a weather issue. That’s possible.”  

Hoffman says most of the Midwest will see above-normal temperatures this week. 

“I’m going above normal for Colorado, northern Texas, all the way through the Great Lakes, Ohio Valley and the Northeast,” says Hoffman. 

He says precipitation this week is below normal for a large portion of the U.S.  

“[There’s a] huge area below normal for the Gulf Coast area and through the Mississippi Valley and across the Great Lakes,” says Hoffman. 

Vaclavik says when weather events occur, in many instances, they have been excellent marketing opportunities for corn and soybean farmers. 

“When the uncertainty regarding the crop is the highest, that’s often the best time for a farmer to do some marketing,” says Vaclavik. 

He says it can be a short window. 

“Even in the years where a crop scare turns into a crop disaster, like 2012 as an example, the corn market topped in early August,” says Vaclavik. “Even in a year, when a scare turns into a disaster, it doesn’t last as long as you might think.”