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Rain makes grain applies this year

Agriculture.com Staff 04/27/2006 @ 1:01pm

The old saying is rain makes grain, and certainly this spring the majority of the U.S. has had its share of rainfall (with the exception of the far western HRW wheat belt).

So far this spring, weather has been ideal except for 1 week of hot/dry weather in the HRW wheat belt. In fact, most areas of the U.S. have received above normal rainfall in spite of the above average temperatures most of March and April. Much of the potential drought area we all worried about on March 1 has had a good share of their soil moisture shortages solved by spring rains.

And so the adage that rain makes grain will probably impact grains the rest of this spring until proven otherwise. Even HRW wheat areas are forecast to have some heavy rains this weekend that should solve at least half of the soil moisture problems facing growers. This could have huge implications on markets, even those that want to go higher on 'inflation' or "bioenergy" bulls.

So while gold, silver, and energy markets have all soared to new highs this spring, grains had plenty of inflation buyers pushing these markets higher as well, even soybeans, that have very negative fundamentals right now (record carryouts). While grains want to go higher on these investor transactions, they've had a difficult time doing so while production prospects have improved.

Now that corn planting has moved ahead of normal progress, it becomes even that much more difficult to rally this market (even the most bullish fundamentally of the grains), as early planting into adequate moisture usually means above normal yields. We'll be hard pressed to rally this summer if the rest of the spring goes this well.

Actually, though, if the rain moves into the corn belt instead of HRW wheat country this weekend, 3-5" rains could finally turn the corn market bullish. Corn's gain on wet weather could be soybeans loss, as the assumptions of many wannabe market analysts has been that some of the March 31 intended soybean acreage would eventually end up in corn. But that assumption made in April usually is proven wrong in June, when final planted acreage numbers are reported.

That could leave corn as the most bullish of the grains in 2006. But it may take significant weather delays to push corn to new highs, as already about 40% or more of the corn has probably been planted by the time weekend rains arrive.

Can we get 2-3 weeks of weather delays? That's doubtful, especially when you consider the size of equipment Corn Belt farmers have to plant their crops. Many Corn Belt farmers can plant their entire crop in 7 days or less of planting, and it takes an unusual spring to allow less than 7 days of corn planting into June 1.

So, it's likely that the March 31 acreage numbers will get planted in both corn and soybeans. Its also likely with adequate moisture and early planting that yields will be above trend, taking even more of the bullish edge off the market. Even bullish inflation investors might have a hard time buying grains in 2006 if this scenario plays out.

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