Smiths Event Risk Gradings: Central United States Shows Severe Drought

Smiths Gradings continues to monitor the drought and reevaluate the event risk of particular credits that are in close proximity to D4 drought locations.  Based on recent statistics from the US Drought Monitor, the most severe drought areas are heavily concentrated in the Central United States. The US Drought Monitor rates droughts from a scale of D0 to D4, with D4 being the most severe.  As of data posted 9/25/12 the majority of D4 droughts are in Nebraska, Kansas, and Oklahoma.  These three states are facing drought conditions just about everywhere throughout their respective states.  The only other area with heavily concentrated D4 droughts is northwestern Georgia and some of northern Arkansas.  Smiths believes that the Drought’s concentration in the Central United States will cause corn and wheat prices to continue to rise.  The lower crop yields will most likely negatively affect local agricultural economies which in turn can affect credits located in this area of the country.

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