Dry conditions are rapidly expanding across crucial US corn production areas, as indicated by Thursday's US Drought Monitor update, revealing that 59% of the country's corn acreage is now engulfed by moderate drought. This concerning 4-percentage-point increase from the prior week has sparked alarm among market players.
Even more disconcerting is the rise in the portion of corn enduring severe or extreme drought, reaching 23%, up 2 points week-over-week. According to insights from market players shared with Mintec, this level of dryness in July is the second worst observed in over 20 years, signalling a perilous situation.
With hotter-than-average temperatures forecast to scorch the Corn Belt in the coming weeks and only limited rainfall expected, concerns are growing that next week's report could reveal further sharp declines in crop conditions, according to market players. Industry sources commented to Mintec that they fear that without timely moisture, yields may dramatically plummet, exacerbating the precarious situation. As pollination is currently underway, any further expansion of the drought during this critical phase could spell disaster for crop outcomes and could add upward price pressure to corn and potentially replacement grains.
It is worth noting that some industry players are hopeful that a cooler August with decent rainfall is on the way, while others caution that the hottest weeks of summer are now arriving, and each additional rainless day chips away at production prospects.
The prolonged drought in the Midwest carries serious ramifications on a global scale. With commodity supplies already facing pressure from an escalating Black Sea conflict, lower US corn yields could drive food inflation higher, potentially leading to shortages in poorer countries heavily reliant on grain imports, according to market players.