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Iowa Ag Review

Abstract

Drought concerns in the United States were the resounding cry throughout the Midwest last spring. The drought fears were so severe that on May 16 the U.S. Department of Agriculture (USDA) scheduled a press conference to unveil the findings of the National Drought Policy Commission. This coincided with the National Oceanic and Atmospheric Association's (NOAA) 90-day forecast calling for drought conditions to persist. There is no doubt that weather premiums exist in futures contracts for upcoming crops and will remain until the crop materilizes. The hard question to answer is: What is the size of a given weather permium?

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