Five, 10-, and 15-day weather forecasts are all the rage these days as mathematical models built by market players (read hedge funds and commercials) start to calculate the effects of rain, soil temperatures, and any other data point that you can think of. Yes, the science behind calculating yields and production is much more advanced than you’d think (I would know – I’ve built some of these types of models, albeit for other industries. If I had the time I’d love to do one for agriculture!). Some cooler, wetter weather is being forecasted for the American Midwest this week, which could slow down some of the most impatient of farmers who are already trying to get into the field with their seeders. That being said, if too much rain hits the major growing regions and impedes field work, prices on the futures board will increase. The reality is, with technology in drills these days, up to 40 per cent of the U.S. soybean and corn crop can be planted in one week. Thus, the rumour of “the crop won’t get in on time” should be considered opportunities to make sales, and not an indication of the trend.
Also worth consideration is that not much on the demand side can dramatically shift the markets before the end of the current marketing year. One supply-side factor could come from later this month when the Russian government is expected to announce whether or not they’ll continue to tax wheat exports after July 1st to start the new marketing year. SovEcon says that an extension of the tax program is unlikely thanks to slowing inflation and crops looking good in the southern Russian regions. On that note, the most recent AMIS report shows that crop conditions worldwide remain mostly favourable, with only “keep-an-eye-on” areas in the US Southern Plains, Eastern Europe, and small pockets in South America & southeast Asia.
The U.S.D.A. put out its first country-wide crop ratings report on Monday, April 6th, showing that winter wheat conditions are doing better than a year ago with 44 per cent of the entire American crop rated in good-to-excellent health, versus the 35 per cent last year at this time. In the Midwest where soft red winter wheat is predominantly grown (that which trades in Chicago), conditions are seen as pretty favourable thanks to good moisture profiles. Conversely, drier conditions in the southern Plains continue to raise yield concerns Also, the U.S.D.A.’s W.A.S.D.E. report out a few days later on Thursday, April 9th, with the report mostly a yawn as U.S. ending stocks were changed a little bit thanks to subtle changes in feed and exports but the market viewed the report as erroneous.
Some analysts are suggesting that if corn seeding is delayed by cooler/wetter weather in the southeastern America (planting there is delayed), farmers will switch to soybeans. That being said, whatever corn acres lost in the Mississippi Delta will likely get made up by the Midwest and Northern Plains thanks to this early spring that we’ve had this year in North America. There’s no doubt that this is probably the driest/furthest along fields have been in six or seven years heading into the planting season. Another week or two of warm weather and prep work is definitely a go, with drills not too far behind. All things being equal, it’s one of the best times of the year with things greening up and the smell of that freshly turned-over dirt in the air.
To growth,
Brennan Turner
President, FarmLead.com
Brennan Turner is originally from Foam Lake, SK, where his family started farming the land in the 1920s. After completing his degree in economics from Yale University and then playing some pro hockey, Mr. Turner spent some time working in finance before starting FarmLead.com, a risk-free, transparent online and now mobile grain marketplace (app available for iOS & Android). His weekly column is a summary of his free, daily market note, the FarmLead Breakfast Brief. He can be reached via email (b.turner@farmlead.com) or phone (1-855-332-7653).