Evening Report | June 16, 2023
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Your Pro Farmer newsletter is now available... Drought continues to expand and now covers more than half of U.S. corn and soybean areas. The National Weather Service’s extended weather outlook through September calls for improved conditions across much of the western Corn Belt, but eastern areas of the region are expected to experience an expansion of drought. As moisture stress and drought spreads across the Corn Belt, comparisons to 2012 are increasing. But World Weather Inc. urges some caution and perspective in comparing the two years. It says comparison years when there was a transition from La Niña to El Niño during the first half of the year within the 18-year cycle, like this year, would be 1969, 1987 and 2005. Yields in those three years averaged 99.9% of the previous record for corn and 101.3% for soybeans, though there was much more variability for corn yields. On the economic front, the Fed paused its monetary policy tightening but indicated more interest rate hikes are coming. We cover all of these items and much more in this week’s newsletter, which you can access here.
Extended weekend ahead... Markets and government offices are closed Monday, June 19, for the federal Juneteenth holiday. As a result, there will be no Pro Farmer market updates on Monday. Grain markets will reopen with the overnight session at 7:00 p.m. CT on Monday. Livestock markets will resume trade at 8:30 a.m. CT on Tuesday, June 20.
A 2012-like drought not expected despite building dryness... As moisture stress and drought spreads across the Corn Belt, comparisons to 2012 are increasing. But World Weather Inc. urges some caution and perspective in comparing the two years.
May was always expected to be a warm, dry month. In years when conditions transition from La Niña to El Niño in May or June, such as happened this year, there was a tendency for May to be the warmest and driest month in the growing season relative to normal. World Weather says comparison years would be 1969, 1987 and 2005. Composite maps from those three years to this year within the 18-year cycle match up favorably.
World Weather says, “May was always advertised to be the most anomalously dry and warm month.”
Split jet stream keeps moisture out of central United States. One of the primary reasons for poor rainfall in the Midwest to date was the split jet stream. According to World Weather, the southern branch of the jet stream has stayed at lower latitudes for a longer than usual period of time. The forecaster says, “Typically in post-multi-year La Niña events there is a tendency for the jet stream to be notably split with many cutoff low and high pressure systems, and that has certainly been the case this year. The split jet stream tends to put weather disturbances over or immediately south of the Gulf of Mexico coast states, which results in failing to get southerly winds to blow from the Gulf of Mexico into the Midwest. The absence of this southerly wind flow this year has reduced moisture in the Midwest, which has contributed to below-normal rainfall.”
Rainfall anomalies will steadily become less intense. During La Niña to El Niño transition years, June has a tendency to be to be drier than usual, though with a little less intensity than May. Temperatures also tended to be a little cooler in June than the previous month.
World Weather says the jet stream is expected to begin lifting north the second half of this month. As this happens, “a more consolidated wind flow pattern will evolve aloft ending the prolonged period of splits and cutoff high and low pressure systems. That will eventually lead to a normal development of southerly winds from the Gulf of Mexico leading to better surface moisture flux into the Midwest. Rain will then begin to evolve more frequently during the balance of summer.”
‘Some’ improved moisture as summer evolves. Rainfall became better distributed in July in the transition years from La Niña to El Niño. In August of those years, rainfall improved in the heart of the Midwest, while dryness shifted to the northwestern Corn Belt and from Kentucky to the Southeast.
As rainfall improved across the central Corn Belt in the comparison years, temps also tended to moderate, with August being the mildest compared to normal.
World Weather expects a similar pattern this summer — a better distribution of rainfall across much of the Corn Belt during July and August, though some pockets of dryness, with moderate temperatures.
El Niño will help the summer weather pattern. “With El Niño present there is a tendency for less warmth relative to what other weather patterns are dictating,” World Weather says. “In other words, if the summer was supposed to be hot, El Niño will make it a little less hot and if the summer was already expected to be cooler biased, El Niño would make the summer even cooler than expected... The lunar (18-year) cycle does not promote a hot summer in 2023. With El Niño added into the equation summer temperatures should be mostly near normal.”
Southwest monsoon will help, too. The southwest monsoon normally spreads subtropical and tropical moisture through Mexico and into the Rocky Mountain states from July to early September. Periodically, some of that rainfall will work into the central U.S. via passing frontal systems. World Weather notes, “A strong negative-phase of Pacific Decadal Oscillation (PDO), like one in place today, will often help to enhance monsoon moisture a little better than usual, despite El Niño. For that reason, we anticipate a little more moisture to come in late July and August from Mexico.”
A 2012-like drought isn’t likely. World Weather concludes, “Some pockets of dryness will be present and will induce periods of stress that could cut into yields in a part of the production region. But a full-blown drought like 2012 or 1988 is not very likely unless the negative PDO takes more control of the summer pattern and induces a stronger-than-expected ridge over the central United States. If that occurs, a larger part of the Corn Belt may suffer from dryness.”
Listen closely to Thompson for possible ways of more farm bill funding for some areas... House Ag Chair Glenn “GT” Thompson (R-Pa.), in our interview with him this week, said: “There are efficiencies that can bring us some new dollars, just as we look at incorporating some of the disaster relief that we normally spend in an emotional way. By incorporating some of that disaster relief into crop insurance, we will enhance crop insurance, make it more attractive for more subscriptions. At the same time. I think we can do that by spending less money, so we’ll bring new dollars in and that’s just one of a number of ideas we have when there’s a recognition that in certain areas, certain titles of the farm bill, we need to find some new dollars.”
Modifying the ag disaster funding approach, thereby actually saving dollars, and “a number of ideas” elsewhere could bring in a lot more farm bill funding than most think, based on our contacts. Any spending holes that develop from such maneuvers could be dealt with via annual appropriations measures.
U.S. sees consistent growth in ag exports to Mexico... The U.S. has seen consistent growth in agricultural exports to Mexico under NAFTA and USMCA, according to Southern Ag Today. In 2022, the U.S. exported 38.9 MMT of agricultural products to Mexico with a value of $28.5 billion, showing significant growth since NAFTA started in 1994 when exports totaled 13.4 MMT and $4.67 billion. Over the 29 years of free trade, U.S. ag exports to Mexico increased both in terms of volume and value, although there were some years where growth was not positive.
Trade value growth stagnated during the mid and late 2010s, despite volume growth. This is thought to be due to the decreased per-unit export value of several major commodities. Nevertheless, value grew significantly over time. While USMCA coincided with a sudden rise in value in 2020, the pandemic and high inflation were likely factors in this growth.
Texas has contributed to the overall growth of U.S. ag exports to Mexico, accounting for 19% ($5.55 billion) of total U.S. ag exports in 2022. Texas’ export values have increased in 13 of the past 20 years, while the U.S. as a whole increased in 15 of the past 20 years.
