Fundamentally Speaking

The USDA crop production data showed another decline in U.S. corn and soybean yields from the September to October report having already been pared from August to September.

Now trade, operating under assumption that small crops get smaller, is entertaining ideas of further cuts in the November and then January 2023 crop production figures.

The U.S. row crops did not finish the season off well with the second half of the summer and into early fall very dry which is why draft levels on the Mississippi River are record low.

Seeing that the latest weekly report from the U.S. Drought Monitor shows that the percent of the U.S. corn area experiencing moderate to intense drought was up 5% to 49% in the latest week while that for soybeans was up 7% to 48% (both highs for the season), raising big concerns about what subsoil moisture reserves will be come spring if we do not get good winter precipitation.

Also noting that 66% of U.S. winter wheat area is in drought which is up 3% from last week, adding to trepidations about what 2023 U.S. hard red winter wheat output will be after a very poor crop was harvested this past season.

This graphic uses data from the U.S. Drought Monitor site, reporting the cumulative percent the High Plains and Midwest areas of the U.S. are covered with drought ranging from D1 to D4, with D1 signifying moderate drought, D2 severe drought, D3 extreme drought and D4 exceptional drought.

We also show the upper 25% quartile level which is 55.2% for the High Plains and 18.5% for the Midwest.

As of this week, 31.4% of the Midwest is in some form of drought which is the highest percent since the middle of June 2021 and well above the top 25% mark.

Particularly noteworthy is how fast conditions dried out as on Labor Day weekend, just 10% of Midwest areas were experiencing any drought at all.

As for the High Plains, in the latest reporting week, 68.6% was in some form of drought which is also well above the top 25% level of 55.2%.

This area of the country has had over 47% of its area in the D1 to D4 categories now for more than two years running showing how entrenched drought has been.

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