First, consider the following chart:
Also consider this chart of the US drought monitor:
Now, consider the these increased temperatures in conjunction with these lowered crop estimates:
USDA’s lowered 2012/13 domestic ending stocks estimates for corn and wheat, anticipating solid demand.
U.S. wheat ending stocks are seen at 716 million bushels, compared to
754 million a month ago and 743 million a year ago, raising projections
for seed, and feed and residual use. Estimates ranged from 637 million
to 792 million bushels, for an average of 743 million. The average farm
price is estimated at $7.65 to $8.15 per bushel, compared to December’s
range of $7.70 to $8.30.
Domestic corn ending stocks are expected to be 602 million bushels,
compared to 647 million last month and 989 million last year, due to an
increased feed and residual use guess cancelling out a larger crop
estimate and a lowered export projection. Before the report, the average
guess was 667 million bushels, in a range of 489 million to 764
million. The average farm price is estimated at $6.80 to $8.00 per
bushel, unchanged from December.
U.S. soybean ending stocks came out at 135 million bushels, up from
the 130 million in December but down from the 169 million from this time
last year. Analysts’ projections ran from 107 million to 178 million
bushels, for an average of 135 million. That’s with USDA raising last
year’s production total, cancelling out increased expectations for crush
and residual use. The average farm price is estimated at $13.50 to
$15.00 per bushel, compared to December’s range of $13.55 to $15.55.
Wheat stocks estimates dropped by 38 million bushels. Corn stocks dropped by 45 million bushels over the last month and are down from 989 million bushels last year. Soy bean estimates did increase from levels earlier this year, but are also down from last year's levels.
Finally, let's place all of this data in context by looking at some long (25 year) price charts.
So, we have
1.) Increasing temperatures,
2.) Declining estimates and actual crop inventories, and
3.) Already spiking long term (25 year) price charts.
This year could be another roller coaster ride for crop prices.