If the scorching heat wave continues much longer, there could be an impact on the U.S. corn crop—and on consumer's wallets.
"We've had oppressive heat indexes, and we're into the stage of pollination. Anything that interferes with the pollination process will reduce (corn crop) yield potential," said Shawn McCambridge of Jefferies Bache.
Corn futures prices fell Thursday on the promise of cooler and wetter weather by the weekend, but the amount of stress on the U.S. corn crop from heat and in some areas, drought, has yet to be seen. Soy beans and wheat are not as vulnerable as the corn crop.
Weather forecasters expect rain in some areas of the corn belt, but temperatures for the most part will remain above average for at least the next eight to 14 days. They also expect a series of storm systems that could result in above median precipitation for the northern plains, upper Mississippi Valley and Great Lakes, but the central and southern plains are expected to remain hot and dry with below normal precipitation.
"By Monday or Tuesday, we're supposed to be right back in the furnace again. If it carries on through next week, we're doing real serious collateral damage," said Sterling Smith, an analyst with Country Hedging in St. Paul, Minnesota. "All the key growing areas are getting some dose of this."
Analysts say the impact won't be known for several weeks, and as corn goes into the next growing stage, it will need cooler, wetter weather to form full-sized ears. "Damage from the heat is going to be wide and variable. It's going to be a local development. There are some fields that got planted at the right time. They're in the right stage, where it's going to be very beneficial," Smith said.
The corn crop was planted late in some areas, due to rain. That in itself could make plants more vulnerable to heat, as their shallower root systems sit in dry soil, according to McCambridge.
However, Ashly Gulke, an analyst with the Gulke Group, said the engineered seed used by many farmers was developed to withstand hot and dry weather. She also said in her discussions with farmers that she finds many of them are doing fine.
Gulke advises farmers on hedging and also works a farm of her own. "'We farm northwest of Chicago and our crop looks great right now. It is hot and the leaves are curling, but they open up again at night. That's a defense mechanism. That's not necessarily a bad thing... nothing's really changing color in the corn belt. A lot of it is because it's late planted. It looks like it's going to be okay," she said.
"A lot of farmers are saying their crops look good, but we can't have no rain and super hot weather for another two weeks or even three weeks," she said. Gulke does not see corn prices rising, because as the price rises demand falls. Also, many farmers switched from corn to wheat feed earlier in the season, and Russia's reentry to export market should keep pressure on wheat prices.
Smith said it's possible that corn prices could return to the high levels of June.
"I think the idea of taking corn upwards back above $7 a bushel to $7.50 is definitely a possibility. We have very tight supplies. We have big ethanol use and it's going to be hard on food prices," Smith said. Corn was at about $6.73 a bushel on the CBOT Thursday.
"What we really need to do is get some certainty of production losses or lower yield levels before we can take this market to the next level," said McCambridge.
Smith said there could still be pressure on food prices even if the corn crop is not seriously damaged. Livestock is also hard hit by heat and animals do not gain weight during heat spells. "We've lost several thousand animals out in the Dakotas due to heat," he said.
Smith said the soy bean crop is not as vulnerable. "Soy beans are fairly tough, and we're not at the critical area yet for beans.
"If it continues into August, all bets are off on how high corn prices can go. We do see demand destruction above $7."
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