What looked like a bountiful harvest earlier this month is now shrinking in the sweltering sun.
Market watchers are divided about whether soaring late-August temperatures mean the upcoming corn and soybean harvests will experience a marginal reduction in yields or a bigger one. Either way, the potential to fall short of previous expectations drove prices for corn and soybeans sharply upward Monday.
The price for corn delivered in December rose 6 percent, or 30.5 cents, to $5.005 a bushel, and soybeans for November delivery jumped 4.6 percent, or 61.5 cents, to $13.895 a bushel. The corn spike was the biggest in 14 months and the soybean leap was the biggest since early 2011, Bloomberg News reported.
Skyrocketing temperatures —expected to continue through Sunday — are being closely monitored by farmers, commodity traders and food businesses.
"Out of nowhere we got this incredibly hot, dry pattern," said Mark Schultz, chief analyst for Northstar Commodity Investment Co., a Minneapolis firm that buys and sells grains and issues advisory reports for both sellers and buyers. He believes that the Midwest has already suffered a 7 percent shortfall in corn yield and a 20 percent decline in soybean yield compared to what markets were expecting earlier this month.
The U.S. Department of Agriculture on Aug. 12 forecast a record corn crop of 13.8 billion bushels this year and 3.255 billion bushels of soybeans, both down from its May forecast because of the late planting after a cold spring in much of the Midwest.
"There is still a pretty good potential for crops around the globe, so this is not a disaster in the making," Schultz said. "But it's disheartening for livestock guys, the ethanol people and the food businesses that had been expecting relief from high prices."
Michael Swanson, an agricultural economist at Wells Fargo & Co. in Minneapolis, said the markets are reacting to what might happen, and cautioned that it hasn't happened yet. Nationwide crop-yield estimates are in line with 25-year averages, he said.
"The market rallied ... because of the potential for loss of crop yield," Swanson said. "But I'm not worried about the crops or the markets right now, because it will all depend on what happens in the next couple of weeks."
The National Weather Service said Monday that the chances of rain in the Twin Cities are no better than 30 to 40 percent this week, and on most days no rain is foreseen at all. Crop experts say that forecasts a few days out are considered quite accurate, but that forecasts a week or more in advance are much less so.
So far, the intense heat is hurting soybeans more than corn, Schultz said. The price of corn has risen high enough that farmers can make up for their reduced yield with higher prices. But soybean prices haven't risen high enough to make up for the larger percentage yield losses for soybeans, he said.
"If U.S. soybean yields fall under 40 bushels an acre, it will drive up world soybean prices significantly," he said.
The nationwide soybean yield estimate is 41 to 42 bushels an acre. Schultz predicts that in Minnesota the yield will be 37 to 39 bushels an acre.
The nationwide corn yield estimate is about 152 to 153 bushels per acre. Schultz predicts 160 bushels an acre in Minnesota.
Steve Alexander • 612-673-4553
