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Cold U.S. weather a growing market concern
Cold weather, not drought, is becoming a major concern amongst traders for US weather forecasts in the near term. The unprecedented cold weather as we enter the planting season has left much of the country under snowbanks that typically have drying soils this time of year. A major snowstorm over the weekend dumped a foot of snow over large areas of the central and eastern corn belt (including parts of ILL, IND, OH, KY, and TN) that will further delay the start of spring's work.
This is starting to become the story of the 2013 US grain crop, with the unseasonably cold weather leaving the US ill prepared to start the spring's work. Pro Ag would not be surprised to translate this cold weather into a late start for all spring's work across the US, with planting likely to be delayed in the first few weeks of the planting progress report (once it begins to come out). As of today, the cold weather is forecast to continue into the next 2 weeks, which will become prime planting for some of the southern US states.
This could result in quite a shift in terms of the marketplace, as last fall the major concern was drought, with most of the country locked in the drought last October. However, the drought is a distant memory for much of the central and eastern corn belt, with only the western corn belt and HRW wheat belt still seeing some impacts of that drought.
However, the cold and relatively wet weather recently has melted even some of those concerns away. It's just hard to develop a drought when temps are 10-15 degrees below normal!
We are coming on the third week of consistently cold temperatures across the US growing region, and we still have cold temps forecast for the coming 2 week period as well. That is having an impact on the spring outlook, with less corn acres likely as we encounter planting delays, and potentially more soybean acres than the report due out next week might indicate (which was a survey as of March 1 - before the cold snap began).
This cold weather, if it translates into late planting, could reduce the yield potential of grains (especially corn) and the acreage of corn if the delays continue into April - the prime planting month for corn. If we plant less than normal corn during April, that means the 'trend' yields forecast for corn country may not happen. And the entire expected acreage of corn may shift somewhat into soybeans. So the late planting is most bullish the corn market.
However, the late planting in 2013 might not translate into bullish news for all commodities. Wheat might benefit from cold temps into late spring as it means wheat (a cool season crop) will be allowed to develop in cool temps (recall soil moisture is also in deficit yet in many winter wheat states). The combination of cool weather and seasonable precip amounts could improve winter wheat prospects considerably.
Soybean acreage also could rise due to a cold spring, as any acreage not planted to corn on time could rotate to soybeans. There is still time for the later planting season to come around to better planting conditions, so the soybean crop could still produce trend yields or better with the right combination of rain and heat during summer.
So the weather this spring so far is likely bullish corn prices, but more neutral to bearish for wheat and soybeans. Of course, it is still early but so far the weather is lining up to create a more friendly atmosphere for new crop corn prices, and potentially a more bearish atmosphere for wheat and soybeans. Will long corn/short wheat spreads work in the near term? That might be likely as long as the weather remains cool and wet to start the spring!
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