Corn Price Surges on Drought

MT. JULIET, Tenn. (DTN) -- December corn futures wiped out a milestone Wednesday morning and never looked back. By closing well above $6 at $6.28 3/4, December corn futures are trading at their highest so far in 2023.

"Weather is still in charge," DTN Lead Analyst Todd Hultman said. "It's really tough to call how this is going to turn." If the weather stays dry, corn prices could climb to $7 or perhaps $8 per bushel. If it rains -- as the weather forecasts anticipate -- it'll be harder to decipher the impact on prices.

On Tuesday, the USDA Crop Progress report showed that good-to-excellent corn condition ratings declined 6 percentage points to 55% nationwide, with large drops in Illinois, Michigan and Iowa from the previous week. It's the lowest good-to-excellent rating since 1988, a notable drought year. Find Crop Progress report details here: https://www.dtnpf.com/….

"Interesting considering that June 1988 came when La Nina was setting in -- whereas June 2023 finds the Pacific Ocean in a solid El Nino phase. My guess is that few if any outlooks had a Corn Belt drought in the scene for early summer," DTN Ag Meteorologist Emeritus Bryce Anderson said.

For most of the year, global weather models suggested a rapid turn from La Nina to El Nino conditions, but long-range forecasters say that transition is taking longer than expected, and that's a key component behind this summer's unexpected flash drought. DTN Ag Meteorologist John Baranick explains it in detail here: https://www.dtnpf.com/….

Usually, when corn prices hit psychologically significant levels like $6 per bushel, farmers start thinking about forward selling some of their new-crop production. But Hultman's heard that's not the case this year. Farmers may be holding back because they're not confident in the crop conditions on their farm, or they think the market can go higher than $6.

"After the crop ratings Tuesday, I kind of sympathize with the latter," Hultman said.

The only time good-to-excellent condition ratings in Illinois were 36% or worse was in 1992, when it was 28% good to excellent the same week.

In 1992, the drought map was similarly focused on the Eastern Corn Belt and Great Lakes.

"Both corn and soybeans finished with record yields that year," Hultman said, adding that a weather note in a USDA report described drenching, drought-busting rains in July. "That seems like a really interesting cautionary tale for the situation we're in right now," Hultman said.

It would take a widespread, heavy rainfall event in Illinois and Iowa to flip the corn market's trajectory like in 1992, and current forecasts call for more frequent, but variable thunderstorms, not the drenching downpours needed to forestall significant production cuts.

Hultman said he doesn't think 2023 will turn out like 1992, "but it's a reminder of how much variability is still in play," with more than a week left in June.

Katie Dehlinger can be reached at katie.dehlinger@dtn.com

Follow her on Twitter at @KatieD_DTN

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