Market Transitions to New-Crop Contracts
The market is paying attention more and more to the new-crop situation. How much corn is planted? What is the weather forecast? How bad is the winter wheat crop?
So when traders return to the market after the three-day weekend, expect weather forecasts to be front and center. Many are looking for improved, warmer weather to allow corn planting to really begin in the Midwest.
The first corn planting report on Monday showed 3% planted, with basically none planted in the Midwest. The report on next Monday (4/21) may show a slightly better number, but it will still look behind compared to the apparent average of 16%. So in some ways, the market understands that early planting is not zesty but expects farmers to make up ground quickly. The following week’s number (4/28) will be more important.
The wheat market struggles with poor conditions and forecasts that do not contain soaking rains. For world buyers, fortunately, the impact right now is small, and there are many alternative sources of exportable supplies.
As planting progresses, the market will also begin anticipating the first comprehensive set of supply/demand reports from the USDA. Due out May 9, it will be the first tables since the Outlook Forum in February. While not “solving” the old-crop issues (corn feed use, rationing needed for soybeans), the focus will increasingly be on new crop and the potential crop size/carryout situation. Some of the fine questions (acreage) will not be answered until the end of June and have dropped off people’s list of important market topics.
For the next few weeks, the only topic of conversation could be planting, planting, planting.
The risk of loss in trading commodities can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial situation.