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Dr. Ken Rietz |
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When Hurricane Beryl started moving over the US, it was a Category 1. Though it dropped to a Tropical Depression, it was still a huge storm; there was heavy rain, hail, and tornadoes, covering roughly half a million acres of the Corn Belt. Since weather is one of the most important factors affecting corn (and most agriculture) futures, you would expect prices to spike hard after such a hit. But you couldn’t see any unusual price movement. Why not? Let’s first look at the corn futures. |
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Figure 1: The front month CBOT corn futures. Beryl went through the Corn Belt roughly July 9 to 11. July 11 was the top of the second blip in July, and it dropped from there. The market clearly decided to ignore Beryl’s effect on the Corn Belt. Why would that be? The market is not always subject to complete explanation, but there is usually some reason. Here are 2 maps of the path of the Beryl storm. |
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The dots are equally spaced at 12 hours, so you can see that Beryl moved slowly when it was approaching Texas, because the dots were closely spaced. When Beryl started getting near the Corn Belt, the dots space out, meaning that Beryl was moving much faster. This is a big factor. If Beryl had moved as slowly as it did over Texas, the damage would have been much greater. Another factor that needs to be considered is that the weather in the Corn Belt before Beryl had been hot and dry. A lot of rain would have been very welcome. The amount of rain in Indiana, for example, ranged from 2 to 4 inches. Again, a slower-moving storm would have dropped a lot more rain and could have been much more of a problem. The final factor that the market certainly considered was the condition of the corn crop. This is measured weekly by NASS. Here are the graphs of those measurements, as a percentage of the total corn crop being either excellent or good. |
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Figure 3: NASS Indiana corn condition excellent or good You might note that in July 2024, conditions on July 9 (just before Beryl) to July 16 (just after Beryl) are the same, meaning that the total percentage of corn being either good or excellent did not change because of Beryl. Despite the severe storm, the condition of the corn did not degrade. Finally, Beryl affected roughly half a million acres. The total amount of corn planted this year is more than 94 million acres, so Beryl could only affect at most about half a percent of the total corn crop. This also goes a long way to explain why the condition of the corn did not degrade much. So, what does this indicate about corn futures for the rest of the year? That is difficult to say because the weather for the rest of the summer has not yet played out. But the current planting is about 3% less than last year, most likely because stocks were somewhat higher. A rather stable price of corn futures appears to be most likely. |