Temperatures warmed up this week across Iowa. The corn and soybean markets also got hot as grain traders in Chicago worried about the impact of more warm weather in the Corn Belt. The Chicago Board of Trade's December 2010 corn contract rose to $.05 on July 15—it's highest price in seven months. The November contract for soybeans rose to $9.88, the highest price since last fall.

These are increases of almost 20% in corn and soybean prices since late June, adding about $2 billion to the cash value, on paper, of this year's crop. Traders are worried that the hot spell this week could interfere with corn pollination and threaten the maturity of soybeans if temperatures in the last half of July and the first half of August are as warm as are expected.

AccuWeather, a forecasting firm, says dry and hot weather next week, July 19 to 25, would bring the hottest temperatures of the year so far. Meteorologist Dale Mohler says Illinois, Missouri and Iowa will have three to five days with temperatures reaching into the middle to upper 90 degree F range.

Plenty of reserve subsoil moisture will help corn during pollination

However, agronomists in Iowa are less worried about the heat this July than the grain traders in Chicago are. "The hot weather by itself doesn't hurt corn that much unless it's accompanied by dry conditions, and we know Iowa has had plenty of moisture this year," says Roger Elmore, an Iowa State University Extension agronomist. "With all the rain we had in June, we went into the pollination period with a full tank of reserve moisture in the subsoil."

Commodity broker Tomm Pfitzenmaier of Summit Commodities in Des Moines puts it this way: "The temperatures are hot, but with the soil moisture we have this July it probably isn't hurting the crop much. The corn market's job is to factor in the worst-case scenario, so that is what the market is doing."

Feed grain prices also got a boost this past week with reports of drought threatening to reduce Russia's wheat crop this year. Wheat is often substituted as a cheaper feed for livestock in many countries. It's availability in Asia and Africa has dampened the demand for U.S. corn in recent years. But this year, U.S. corn exports are up 9% from a year ago.

Higher corn and soybean prices translate into increased costs for livestock producers and ethanol plants. ISU economists say ethanol plant profit margins have narrowed significantly in the last month. ISU economists predict that while hog and cattle production has become profitable for the first time since 2007 thanks to lower grain prices and reduced herds this year, hog and cattle prices are unlikely to rise much for the rest of 2010.