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Drought concerns, pond concerns

Agriculture.com Staff 04/26/2007 @ 2:24pm

In the spirit of extremes, it seems that weather has everyone's attention this week.

Most of Iowa is a pond this morning, rain is still continuing in the eastern Corn Belt and many farmers are realizing it will be May before they can plant corn. Even with warmer, drier weather in the forecast, frustrated farmers are wondering if the futures market has an adequate risk premium in it to reflect the slow pace of plantings.

Wheat traders are also realizing they need to pay attention to weather in other areas of the world. There are several areas in Europe struggling with a hot, dry spring, including major wheat producers France and Ukraine. French wheat futures prices set new highs this week.

The futures market is also paying attention to the continuing evaluation of freeze-damaged wheat in both the hard and soft winter wheat areas. It is fair to say that the situation is still evolving, with some tearing up wheat and others taking a more wait and see attitude.

It has been interesting to learn (mainly via the web) about Australian agriculture and the continuing drought "down under." The latest news is that irrigation in the Murray-Darling basin will have to be stopped for the coming crop season unless heavy rains fall by mid-May.

The Murray-Darling basin is the country's largest river system, covering an area four times as large as Great Britain. This affects high value fruit, vegetable and vine crops, plus cotton, rice and forage for dairy cattle and sheep. Two-thirds of the total farm output by value comes from this region, making it sort of the California of Australia. Imagine not being able to do anything to grow a crop and imagine the devastation if your operation involved permanent crops like grapevines and fruit trees.

This potential halt to irrigation does not affect wheat, which is a dryland crop in Australia. Still, some are concerned with wheat seeding for the upcoming crop, as farmers had hoped the drought would be broken by now. Rain is in the forecast for parts of Australia, including the southeast corner, which is one of the wheat growing areas.

The risk of loss in trading commodities can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial situation.

In the spirit of extremes, it seems that weather has everyone's attention this week.

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