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Update for August 27, 2022

Pro Farmer Crop Tour Final Yield Estimate and Megadrought Issues

The 30th annual Pro Farmer Crop Tour concluded Thursday. Iowa and Minnesota crop estimates were finalized yesterday and are included below in graphs for both corn and soybeans.

The map shown illustrates where and when the Crop Tour collected the data.

Green = Monday

Yellow = Tuesday

Orange = Wednesday

Red = Thursday

The European Commission says that as a result of the worse drought in 500 years, 47% of Europe is under some level of warning conditions and 17% is in a state of alert. This has prompted the Commission to reduce the outlook for this season’s corn crop from 65.8 MMT down to 59.3 MMT vs last year’s corn crop that totaled 71 MMT. The hot and dry conditions have caused a reduction in inland shipping, the production of electricity and of course has lowered yield potential. Many traders and analysts believe the EU crop will be reduced even further.

Europe with all member countries combined is the world’s 4th largest corn grower but remains a net importer. Given the current situation in Ukraine the EU may have no alternative but to purchase corn from the U.S. and Brazil despite current restrictions on GMO’s.

China’s crop has endured more than 70 days of extremely high temps coupled with little rainfall. This has depleted the abundant water supply of the Yangtze River which supports 450 million people as well as one-third of the countries crops. There is some rain in the 10-day outlook but in areas where the crops are too far gone the government is encouraging farmers to switch to late autumn crops like sweet potatoes, not an easy change to make. The agriculture ministry said earlier this week that the hot weather posed a “serious threat” to autumn grain production and has asked local governments to “do everything possible” to find more water.

Western states in the U.S. are also learning to deal with water shortages. Over 75% of the globe is covered by water but 97% is salt water, leaving a mere 3% considered as freshwater, reserves of freshwater are vital to survival. The top 5 countries based on their freshwater reserves:

• Brazil has the largest reserves in the world with 12%, about 70% of this reserve is found in The Amazon region.

• Russia holds second place with 20% of the world’s reserves.

• The U.S. comes in 3rd followed by Canada and China.

Because of the long-lasting drought farmers across the western U.S. will not be surprised to learn that the Federal government has decided to further cut water supplies. The Colorado River has reached a “tipping point” and producers that utilize water from the river in Arizona and Nevada will face unprecedented cuts. These states missed a deadline to submit proposals to further cut water usage and because of this face more severe restrictions than the other states that make up the rivers Upper and Lower Basin’s. The Upper Basin consists of the states of Colorado, Wyoming, Utah and New Mexico, the Lower Basin consists of California, Nevada and Arizona as well as Mexico where the river ends at the Sea of Cortez. The river supplies water to nearly 40 million people. About 70% of the water is used for irrigation, with 90% used to support winter vegetable supplies.

The total Colorado River storage systems have dropped to 37% full compared to 46% last year. The two largest reservoirs, Lake Mead and Lake Powell are both dangerously low drained by the 23 year “megadrought”. If the situation does not change the falling water levels in Lake Mead will fall below the minimum protection elevation by next summer. This could halt the power that is produced by Hoover Dam by 2024. Lake Powell is projected to fall to just 23% of capacity by the end of this year. At this level the threshold known as the “minimum power pool” will nearly be reached at Glen Canyon Dam, the second largest producer of hydroelectric power across the Southwestern U.S.

Both the 6-to-10 and 8-to-14-day outlooks are shown below.

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