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Planting progress impact fades
The planting progress report released Wednesday, and the trade reaction to it, reinforces my theory that delayed planting and excess moisture conditions seldom produce lasting positive action in the grain markets. Maybe the negative response in prices is a manifestation of the principle rain makes grain. Farmers in Iowa and farther east probably have a difficult time agreeing with that old saw, if their seed corn or soybeans are still in the bag. However, my own experience in 1982 and 2008 tells me that it is best not to count on reduced yields from late planting to make up for lost income from acres not planted.
In 2008, I drove across Iowa and southern Wisconsin to Milwaukee where Sharon had a conference the last week of June. I came home from that trip so bullish I was hard to live with. Interstate 80 was closed from flooding from Des Moines to the Mississippi. Some places between Madison and Lake Michigan had water lapping at the edge of the pavement. I sold the last of my 2007 crop, over the July 4 holiday, at the highest price ever recorded at my local elevator the day after the holiday weekend. My trigger was the fact that I had emptied my bins and did not want to store the small amount that was left. That proved to be the highest price offered for corn at that elevator, until the late summer of 2012.
There were other instances during my farming career when I have been misled into thinking prices would go higher because of planting late or into poor conditions. It seldom has paid off to ignore normal price patterns just because some farmer somewhere plants corn in June. In one instance, I planted some corn in the middle of June because of flooding and reduced stand from cutworm damage. I got about 60% of a normal yield. That was not what I had initially hoped for but much better than nothing.
Maybe my theory will be wrong this year. Inventories of old-crop grains are very tight. There are not a lot of stocks in storage to fall back on. The fact that there are millions of acres that are not going to get planted should provide a level of price support higher than thought possible a month ago. However, that is a factor that farmers have known about for weeks. It is not news! Maybe the current prices for new-crop corn and soybeans have already discounted for the difference between nearby futures and harvesttime contracts. I still hear market analysts talk about how a normal crop will produce sub $5 corn at harvest. Under today’s conditions that does not appear to be likely.
Selling in increments on any rallies is a good strategy for at least a small portion of the anticipated new crop. Remaining stocks of old crop still in storage should be considered gambling bushels in the event that the weather turns hot and dry or excess moisture continues.