I’m no farmer, but I’m a big believer in the marketplace, and the recent run-up in the corn market makes it clear that the current heat wave is harming the prospects of corn yields. This week, heat indices hit 120-129 across Iowa, Minnesota, South Dakota and parts of Illinois and Kansas.

While the corn crop has always been important to the cattle industry, it’s become even more so with the advent of the federal ethanol subsidies and mandates. Corn prices have doubled as a result of ethanol, but we have been fortunate in that we’ve enjoyed record crops year after year. The latest USDA projections were for yet another record crop, but also extremely tight inventories.

This type of ongoing heat stresses the crop but, as in most things, the timing is the crucial factor, and we are just beginning to enter into the critical pollination stage. Between the floods, drought and heat wave, many experts are downgrading the yield prospects for this crop.

Through the heart of the Corn Belt (Iowa, Illinois and Nebraska), the crop is still in pretty good shape. But, in the short term, nearly all of the risk in the corn market is on the upside. After all, it was just last month that USDA projected a record harvest of 13.47 billion bu. If nothing else, the market’s reaction to that report was telling as “Dec corn” never spent much time below $6/bu. The upside certainly remains gigantic compared to the downside in the corn market.

Maybe Mother Nature is just reminding us of her power this summer. Certainly, with the drought gripping the Southwest, at least she is proving that she’s every bit as powerful as the politicians or bureaucrats in D.C. who have been the major drivers in the marketplace for quite a few years.

Check out the U.S. Drought Monitor at www.drought.unl.edu.