COLUMBUS, Ohio - Drought conditions impacting over half of the contiguous United States are generating more market uncertainty than normal, which may make marketing decisions more difficult come harvest. "Historically, there is the potential for fairly significant production changes from August to September based on August weather conditions because August is an important growing month," said Ohio State University agricultural economist Carl Zulauf. "So there is always an unusual amount of uncertainty during this period of time, but there's a larger amount than normal this year." Shrinking corn and soybean production numbers and lower yields for Ohio headline the U.S. Department of Agriculture's August Ohio farm report. Ohio's corn yield is estimated to drop 19 percent with overall corn production falling 24 percent. The state's soybean yield is expected to drop 8 percent while production is estimated to be down 9 percent. "The total number of corn, soybean and wheat bushels produced in Ohio this year will be down 20 percent based on the August report," said Zulauf. "Thus, substantially less grain will be stored in the state, both on-farm and off-farm. As a result, I would expect off-farm storage costs to be no higher and probably less than last year since there will be less demand for storage space. Also, you would expect the harvest-time futures to cash basis to be less than normal this year, again because of less demand for storage and because of the smaller than normal production." According to the August report, U.S. corn and soybean numbers have also decreased compared to last year. Corn yields are expected to fall 9 percent, while production will drop 6.5 percent; soybean yields are expected to drop 8 percent with production falling 9 percent. Zulauf said forecasting prices right now is more difficult than normal. However, only part of the reason is because of the potential for changes in the Sept. 12 release of the next USDA production report. Prices of December corn and November soybean futures are up between 20 and 25 percent since spring, Zulauf said. "Higher prices will curtail demand, but it is very difficult to know when price is high enough to substantially reduce demand. Historically, a 20 percent increase in price is enough to begin curtailing demand," Zulauf noted. "We are seeing a slow beginning to corn export sales for the new crop year and the combination of lower prices for milk, beef, hogs, and broilers compared with last year, combined with higher feed costs, should begin to curtail livestock production. "However, we did not have large stocks-to-use ratios coming into the production year and there have been production problems in other countries, notably Canada and Australia," said Zulauf. "And, we have the added uncertainty created by how higher prices will affect the rapidly growing ethanol market." Furthermore, Zulauf said that as harvest approaches, the markets will shift their attention to feed grain and oilseed production in Southern Hemisphere countries like Brazil, Argentina, Australia and South Africa. "So much depends on what happens in the Southern Hemisphere and it makes understanding the dynamics of what the markets will do much more difficult than it was 20 years ago," he said. "Back then, you didn't have the big production of soybeans and corn in the Southern Hemisphere, so when the United States had a production problem, you knew what the prices would have to do come post-harvest. Now it isn't quite as clear. Increased production in the Southern Hemisphere can offset much of the production problems in the Northern Hemisphere. Staying on top of the weather situation in the Southern Hemisphere will be an integral part to making informed marketing decisions." Zulauf added that producers should be watching other countries like China and the former Soviet Union countries. "China was a fairly aggressive exporter of corn during the current marketing year. If it is again this year, that will have an impact on our exports to Asia," he said. "The former Soviet Union countries emerged last year as a major exporter of wheat, exporting 340 million bushels into the world market. It will be interesting to see if they can maintain or increase their export potentials." All of these factors will come into play as the market searches for the price that will curtail demand to bring it into balance with supply. As the market searches for this price, prices will be volatile. "When prices are volatile the old marketing adage is to sell a little bit at a time. You may not get the high prices, but you'll get close to the average price. It's just common sense," said Zulauf. "Another way of saying this old adage is that we could be having a very different conversation a month from now."