It's a selling opportunity
After suffering through one of the hottest, driest summers in history, who can blame farmers for being afraid of another summer of drought. The fear was compounded by an almost total lack of moisture recharge over the winter. Now, we are locked into a weather pattern that is directly the reverse of what most farmers thought. The weather rally that most observers thought would be in place by now is in fact causing price improvement. However, the cause is not what we anticipated it would be.
The characteristics of the recent price move are different than they would be if the problem was fear of dry weather. A normal weather market takes a long time to develop. The peak of a dry weather rally usually comes in middle to late summer. Unless the weather pattern is in a prolonged spell, the top usually comes a day or two before a general rainstorm large enough to relieve the crop stress.
A weather rally caused by excess rainfall comes much earlier in the growing season. It is unusual for a wet weather problem to be severe enough to reduce yields nationwide. The peak of this type of weather rally usually ends the day planting progress reports reveal more than expected planting progress. With the old-crop supplies so tight this year, the effects of delayed planting and cool weather may be exaggerated. With current corn planting progress at 86%, as reported last week, and with the rains that fell most of the week, reduction in planted acres may support prices for most of the summer at a higher level than anyone thought a month ago.
My experience, from 44 years of farming, is that excess rainfall at planting time and cooler-than-normal temperatures rarely have a lasting positive effect on grain prices. Will conditions this year be different enough to support prices at a higher level all summer? Time will tell. However, this rally looks like a selling opportunity for those farmers who have their crops planted. We can hope that this weather rally results in new-crop bids getting high enough to result in a profit with normal yields.