When the U.S. Department of Agriculture releases its most recent
corn crop estimate in its World Agricultural Supply and Demand
Estimates (WASDE) report, the results are not expected to be
pleasing for those who must buy grain crops.
[caption id="attachment_69779" align="alignright" width="300"
caption="Droughts have taken their toll on America's corn crop"]
Judging by market action over the past week, the report looks to
be dismal as the exchange traded funds for corn (
) and soybeans (
) have both increased due to the impact of droughts.
In the previous WASDE report, the percentage of the U.S. corn
crop rated excellent or good was 40%. However, due to
record-breaking droughts in the Midwest farm belt,
corn and soybean grain crops have continued to
. Due to the lack of rainfall, only 24% of the corn crop is rated
in good to excellent condition, and 48% is rated poor to very poor.
As the U.S. produces about 40% of the world's corn crop, this
shortfall has had a devastating impact on the agricultural
Over the last month of market action, CORN is up by 9.4%. Over
the same period, SOYB has risen by 2.46%. As the chart below shows,
the increase in price of both SOYB and CORN began in June as the
impact of the droughts increased. There have corrections along the
most of the buying has been done by speculators
. The soaring volume in these grain crops is testament to that.
Adding to the surge in CORN was the largest purchase of American
corn by Mexico in over two decades. Even though both CORN and SOYB
are trading near 52-week highs, the Mexican government expects the
price to continue rising as a result of the droughts further
damaging grain crops.
The purchase could be a sign that a peak is near. The most
recent jump is likely the result of speculators anticipating a
bearish report from the U.S.D.A.