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Market whispers

Agriculture.com Staff 05/15/2008 @ 9:50am

The market recently has been whispering things to us. Have you been listening?

Are you a "market whisperer" (similar to the often talked about horse whisperers)?

Wheat prices have been tumbling lower, while winter wheat crop conditions have been slowly improving (vs. normal) until Progressive Ag yield models are actually suggesting we now have an above average winter wheat crop coming. Cool weather is ideal for wheat development, and so far weather all across the country has been cooler than normal since Mid-March - an abnormally long time. That's ideal wheat weather, and winter wheat has responded positively. Although behind normal development, so far that has been nothing but good for the crop. HRS wheat planting, after a slow start, is also ahead of normal planting progress now. Dry HRS wheat areas in the western Dakota's and Montana have had rain recently (as has dry western HRW areas), and things are looking up. USDA (although 1 bu/acre low in their May yield estimate vs. Pro Ag yield estimates) is estimating US stocks will double after this year, and world stocks will also increase significantly after a record shattering world crop. Wheat prices are tumbling lower, in a constant downtrend. Anyone who sold in the past 2 months is far ahead in the marketplace. The inverse in the market for HRS is $2/every 2 months going forward to Sept (a projected $4 loss in 4 months).

WHEAT COMING SOON!

Corn planting was far behind normal recently, pushing corn prices above $6.50 Dec08 for the first time in history. Basically, wheat is priced almost cheaper than corn as a feed grain, and certainly with a 50% hike in SRW some will be fed across the country. However, corn planting has advanced rapidly the past week, with over 24% of the crop planted in virtually 3 days of planting across the Corn Belt. Now, forecasts show a window of perhaps 5-6 days of planting in the next 7 days across the northern and western Corn Belt. It's likely progress will be rapid on corn, and a good start on soybeans in many areas. Things are changing in a hurry, and the recent 50c premium added for planting delays is quickly evaporating. It looks like most or all of the intended 86 million acres will get planted, maybe even more, if the weather holds. Corn prices are starting to drift lower. While at one point, the soybean/corn price ratio had narrowed to 1.8, today it has widened out to 2.15 - a sharp change in this ratio in just a week or so.

CORN RALLY OVER?

The soybean/corn ratio mentioned above has increased in the past week or so from 1.8 to 2.15. Soybeans have been gaining fast, and corn has been fading - both at the same time. The market all spring has been screaming economically to Corn Belt farmers to plant more corn. First of all, the March 30 report indication of 86 million acres of corn wasn't enough, everyone thought. We needed more corn acres. Then planting got delayed from wet conditions in the Corn Belt. Corn gained even more relative to soybeans, and peaked at about $200-$300/acre profit advantage over soybeans for much of the corn belt. This was even more favorable for corn during planting in 2008 than 2007, when we attracted 15 million more acres (what was called impossible in Jan07)! Certainly, for those who could shift to corn in 2008, there was plenty of money to pay for it - even with expensive fertilizer!

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