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Drought talk heads north

Jeff Caldwell 01/03/2012 @ 3:07pm Agricultural content creator and marketer.

The last 3 weeks have been a hot, dry stretch in Brazil and Argentina and the grain markets in the U.S. have taken note.

And, while that hot, dry weather's continuing in the southern hemisphere, it's got farmers starting to take note of dry conditions in the Corn Belt, too.

Some rain did fall in South America late last week, but it wasn't enough to ease most of the crop-stressing weather worries there, where La Nina has some temperatures peaking at 100 degrees.

"Little or no rain is forecast in the major growing areas of Argentina this week, with highs mostly in the 90s, with a few spots reaching 100. This will keep crop stress high on the corn crop in Argentina, some of which will still be the pollination stage into mid January," according to Craig Solberg of Des Moines, Iowa-based Freese-Notis Weather, Inc. "Some rain chances will likely occur during the 6-10 day period, but major rains are not seen at this time, with most amounts near to below normal. In southern Brazil and eastern Paraguay much of the week will be dry, with just a few scattered thunderstorms later in the week. These areas will also have below normal rainfall for the 6-10 day period. Many of these areas need rain in the near future to avoid yield reduction."

The last 5 days have seen up to 3 inches of rain, though, in the Parana and Mato Grosso do Sul states. Though these conditions have had the greatest influence on the grain markets recently (a trend that's likely to continue at least through the next few weeks), the relative warmth (almost 60 degrees in central Iowa on New Year's Eve day) and lack of moisture so far this winter in the Corn Belt is starting to get some attention.

"We are currently installing a county main tile system in north-central Iowa. This is a 24-inch main at depths from 6 to 12 feet. This is prairie pot hole heavy soil with very little slope," says Agriculture.com Marketing Talk member maddog4020. "Last week on my farm, it was 12 feet deep in an area that has been wet my entire lifetime. There was no sign of water at that depth and all field tile are also dry.  This dryness in the heart of the Corn Belt will need to command some risk premium in the market if it persists into spring."

Conditions like these will put a premium on spring rainfall if the current trend continues throughout the winter. And, that could add more of a risk premium to the grain markets.

" We have picked up some moisture the month of December but not enough to replenish subsoil moisture," says Marketing Talk contributor NW IA. "We will need March and April rainfall or we will start out with no reserves."

Adds Marketing Talk senior contributor sw363535: "2012 markets are primed to be wild if the economics can support it. But supply & demand are going to be wild for the fall crops, especially if the next 3 weeks in South America mirror our July."


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