Dry Weather Leads to Rising Crop Prices

By Commodity HQ  JUL 19, 2013 11:00 AM

The dry heat will cause crop losses and and a rise in prices, but perhaps more pressing is the interruption of the pollination cycle, which could damage future supplies as well.

 


With summer temperatures topping out around the United States, the heat could have consequences beyond rising electric bills. Corn and soybean crops will reach maturity over the next few weeks, but the dry heat affecting growing areas of the US could erode crop conditions. As the historically largest exporter of soybeans and corn, US farmers have a lot of pressure to ensure a strong harvest this year, but analysts are already predicting  another rough summer for the commodity supply.

The Effects on the Supply

While losing crops to the dry heat could lead to a rise in prices, the larger concern for farmers is the interruption of the pollination cycle. Both corn and soybeans will reach maturity over the next few weeks and a healthy plant will then produce pollen, but in cases of extreme heat and dry weather the plants will conserve their energy and will under pollinate if at all. This could mean a weaker crop in the future and has a number of planters worried.

Compared to last summer’s conditions crops are practically thriving, but once again, we are seeing a summer rise in price. Below we illustrate how high soybeans (in black) and corn prices (in green) reached last summer after the drought and that prices have yet to fully correct.



Ways to Beat the Heat

As crop prices continue to rise with the heat index investors a faced with a number of options to play the peak:
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Editor's note: This article by Carolyn Pairitz was originally published on Commodity HQ
No positions in stocks mentioned.