Demand market becomes weather market
It's official! Our demand led bull market has turned into a weather market, with delayed planting due to extremely soggy conditions across the central and eastern Corn Belt.
Demand is still strong, with corn feed use surprising almost everyone at how high the crop is being used for feed at $6 futures. But the demand is still there, and so is demand for ethanol now that crude oil has run to $114 crude oil prices.
But weather is becoming even more critical, as the intended planted acres of corn was not enough to meet current demand at a normal crop yield level. But spring 2008 has become the monsoon that never ends for the central and eastern Corn Belt. A large swath of land in this area is as soggy as it's ever been, and now the official readings on planting progress are showing delayed planting. These official estimates are not likely to change at least for the next 2 weeks, with very wet conditions and cool weather forecast into the next 2 weeks.
This makes for a very interesting spring as the demand led bull market has really not ended yet, with energy prices pushing to new highs and corn use (and soybean demand still strong). The US needs at least another 4-5 million acres of corn planted than intentions stated, and yet the weather is not making it any easier for that to become accomplished. We also need at least trend yields to meet our demand needs, and delayed planting make that less likely to become a reality.
We already have $6.30 Dec corn futures, but given the difficult nature of this spring it's not certain that farmers will even be able to respond to the corn price incentive to put more corn in. Not only that, but farmers are almost never in control of the actual yield they get from each acre of land. Only one entity knows for sure what 2008 yields will bring at this point, and although lots of analysts think God speaks to them, typically it's a false alarm.
So spring 2008 so far is not solving any of our problems, and is raising more questions than answers in knowing whether or not we will meet demand needs, or be woefully inadequate in our production of various crops.
This winter, it was the weather gurus that were predicting that drought was the greatest threat to the 2008 crop, with the severe drought of the Southeast threatening to move into the Corn Belt. As we enter the middle of April, it's not drought that appears to be the threat for 2008. Instead of the drought moving into the Corn Belt, the monsoon in the eastern Corn Belt has chipped away at the drought in the Southeast to the point that drought is no longer a major worry. Instead, it's cool/wet weather that has become the greatest threat to this crop.
As much as we like to think we know, there is a lot that man cannot know. And maybe it's for the best, as it's the mystery of life that makes it so interesting. And this spring so far is very interesting!