An early spring
Could it be that 2010 will be an early spring??? That is not a misprint! Even with flooding in March across the upper Midwest, there is still a chance that we can get an early start to spring planting and fieldwork due to the very warm March and April thus far in 2010. The weather has been very cooperative to date, allowing warmer than normal temperatures to melt snow early and move the water off the soils mostly during the month of March.
Now that April has begun, fields are starting to dry off enough to allow equipment to pass over them, and that is starting to exert some pressure on grains. Previously, very soggy soils across most of the US made it look like it could potentially be a very late spring. Now that is becoming less and less a possibility as the warmer than normal spring advances.
That could provide pressure to the market as we enter spring, especially since many anticipated delayed planting due to the media coverage of flooding problems in many areas.
South American weather has turned back to favorable for the 2010 crop, with both Argentina and Brazil likely to produce larger crops than last year. In the case of Argentina, the crop will be much larger than last year's failed drought affected crop. In 2010, its likely a billion more bushels could come from South America (SAM), and so far the harvest has gone well for them, too. Dry weather is now forecast to envelope the growing regions in both Brazil and Argentina the coming week, allowing harvest to advance in Argentina and pretty much be completed in Brazil. The large crops coming out of South America will quickly start to challenge US exports for their share of soybean exports.
On the positive side for grains, the US stock market continues to rally, pushing toward the 11,000 DOW mark. Previously, a strong stock market was supportive to grains, but recently the grains have not followed the stock market higher. Pro Ag is unsure if this trend can continue, and either the commodities might have to start to show some firmness, or the Dow some weakness as it doesn't seem right to have a strong economy and weak commodity prices - especially given the world economic concerns we experienced the past 2 years. Could the economy and grain prices finally be disconnecting themselves? That would mean that the markets have concluded the US is no longer at risk of financial meltdowns or shocks to the economic system - good news if this is true!
Another positive sign is the strong oil price, where crude oil levels have rallied back to recent highs again. Usually strong crude/energy prices mean support for corn and soybean oil prices, but so far that has not overcome the negative fundamentals of the grains.
Pro Ag is getting the impression that in spite of seasonal tendencies for grain markets to go higher this time of year, we might not find that support this year due to the excellent SAM crop and the good planting conditions so far this spring. If the weather continues to cooperate with growers in helping get fieldwork started and move along the planting pace, then we could see additional price pressure start to build in commodities. That might not be what we want to hear as we start another production season, but then again there is always something that can be done about it if you truly believe prices will drift lower from here. And thus the beauty of living in America, the land of opportunity - AND responsibility for creating your own opportunities!