Midwest’s Dry Soil Enhances Yield Declines

April 25, 2000

Given the dry soil conditions throughout much of the Midwest, the probability of below trend line yields is at least double the norm. Some predictions indicate the odds could reach 40%, says Terry Francl, American Farm Bureau Federation senior economist.

In mid-March, the National Oceanic and Atmospheric Administration said the United States would experience a drought this year. Commodity markets, which already had incorporated about a 5% reduction in trend line yields for this year’s crops, quickly responded by pushing prices of several commodities to new calendar-year highs, says Francl.

"The real issue facing producers today is what impact adverse weather will have on yields in the 2000 crop year," he continues. "Meteorologists and weather forecasters indicate that there is about a 15% probability that adverse weather will push yields below national trend lines. Given the dry soil conditions throughout much of the Midwest, the probability of below trend line yields is at least double the norm," adds Francl. "Some predictions indicate that number could reach 40%."

Francl says drought predictions, which have driven up crop prices over the past two or three months, "afford some good marketing opportunities for producers." Chicago Board of Trade corn and soybean prices imply yields will be 5-10% below trend. "For crop producers who have not initiated or completed their marketing plan for this year, the opportunity to lock in some of these prices should not be ignored."