Warm/wet weather is bearish
Last week, in this column, I asked the question whether warm/wet weather was bullish or bearish.
Between the lines I suggested that it is not necessarily bullish (which is what most traders/analysts thought), and this week we found out why. The warm weather jumpstarts planting progress a lot more than we realize. On Monday, crop progress numbers showed excellent planting progress last week across the Corn Belt (53% planted vs 63% average, advancing 30% or 27 million acres last week). MN and ILL planted a huge amount of acres, and this week they also continue to plant aggressively, as most areas got less than 1" of rain over the weekend.
South Dakota didn't fare nearly as well, with some 8"+ readings in the Aberdeen, SD area that will create problems. But much of the rest of the Corn Belt fared much better, with mostly western IA, eastern NE/SD, and parts of KS/OK/TX having too much precip the past week.
Hard red spring wheat producers also made historic progress last week, with virtually no rain until late in the week that allowed farmers to plant over one-third of the crop in just one week. That puts HRS wheat planted acreage (and barley) nationally ahead of normal planting progress at 68% complete vs. 62% average, 6% ahead of normal! With good soil moisture almost everywhere, this isn't really a bullish development at all.
There are still a lot of people who want to buy corn breaks, and this week they got another chance as prices have dipped down to recent lows for this season.
New crop continues to be pressured by the rapid pace of planting in the central/eastern Corn Belt, which is likely to wrap up planting over the next few days. The weather is expected to stay mostly warm/dry for the next 5 days, with the extended forecast this afternoon showing a warm/wet pattern (above normal/normal temps and precip). Once the crop is planted, warm and wet is actually a greenhouse type environment, so even though we had rapid price losses the past few days, the market is still struggling to rally.
The best chance of keeping the market on edge and holding some price premium is for the soggy western Corn Belt to stay soggy, so acres still left to plant don't get done. There still is a lot of time to plant corn acres, though, and with warm/dry weather this week we might see planters get back into the fields by early next week - even in the wettest areas. Unless funds really start to load up again on corn ownership, we may have already topped corn prices for the year. Very good planting conditions, too much stored soil moisture, and not enough planting delays seem to be the death of this bull market.
Soybeans are rallying this week, but mostly that is due to expectations that even more corn acres might be planted in the central/eastern Corn Belt, due to the rapid planting pace. With South American crops being record large again, it's likely there will be plenty of soybeans to go around in 2007/08.