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Beautiful weather

Agriculture.com Staff 04/24/2009 @ 12:48pm

The sun is shining. The weather is warm enough to work in shirt sleeves. The plum bushes are blooming. The red bud trees in their glory are announcing that spring is really here. Early garden plants like radishes and onions are finally growing. Maybe more important, I finished planting corn this morning. I know spring has sprung because my muscles are sore and my mind has a difficult time focusing on anything that does not include putting seeds in the ground.

Planting is early this year. We have had numerous incidents of rain, but they have all resulted in small amounts of precipitation. As of April 1, we are almost two inches below normal. Moisture conditions are ideal for planting. However, we are not building up much of a reserve. That is OK for now. I hope that changes before the heat of summer.

Markets focus on weather as they do most years at this time. It seems as if the focus is more on next weeks weather than on what we see from the tractor cab. Last week the forecast was for good planting weather this week. Corn futures went down on anticipation. The good weather really materialized for once.

Now the forecast is for more rain for next week. In anticipation the corn market is up and soybeans are down. This illustrates the "futures" nature of the markets. Perception is reality when traders act on what they perceive will happen next week. Alert farmers can utilize this feature of the market to capture prices on their grain that are higher than what is available at harvest.

The risk premium being built into prices now will disappear when the risk goes away. This happens most often around the middle of May. Last year it did not happen until July because the risk lasted well into the summer. In many years, a weather rally later in the summer offers another change. Timing of that event is always difficult to forecast.

The important thing to remember about the current situation is that if the weather forecast changes, the spreads between corn and beans and between different delivery months will also change. An approach to take advantage of this is to sell corn when poor planting weather is predicted and sell soybeans when good corn planting weather is predicted. Remember that the risk premium will probably go away before the risk ends. In other words, prices may drop before everything is planted!

The sun is shining. The weather is warm enough to work in shirt sleeves. The plum bushes are blooming. The red bud trees in their glory are announcing that spring is really here. Early garden plants like radishes and onions are finally growing. Maybe more important, I finished planting corn this morning. I know spring has sprung because my muscles are sore and my mind has a difficult time focusing on anything that does not include putting seeds in the ground.

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Weather Trumps Demand