Rain event unsatisfying
We had two inches of rain last night, at my farm. Previously, there had been 1.50-inches of rain Sunday night. That rain was obviously welcome. But, it covered a very small area and resulted in almost nothing to 2.00-inches where it did hit. Prior to those events, we had been almost a month without significant precipitation. On hot days, the corn was starting to roll. Soybean stands are spotty at best. Those fields planted early look really good. Those planted at the beginning of the first week of May do not look as good.
I find it difficult to assess the moisture conditions in other parts of the country, since I farm on the western fringe of the non-irrigated corn and soybean growing belt. One contact in central Illinois was here over the Memorial Day weekend. He commented that he would have liked to have had some of the rain that we got in April. I pointed out to him that the grass in lawns was turning brown, even though it was only May. My understanding is that much of the crop producing area of the country is suffering from lack of moisture.
Reaction by the trade to last night’s rain was interesting. Under normal circumstances, a rain over the area that had been dry for a month would have brought limit down moves in the grain markets. It is a rare occasion when that does not happen. I have seen the markets react to a rain event the day before the event occurs. In today’s market, corn futures and old crop soybean futures dropped but new crop soybean futures remained positive.
It probably is no surprise that old crop corn futures took the biggest hit because they had been the strongest of the grains for a long time. The key to this market will be whether the basis can stay as strong as it has been. The latest old crop corn bid in my area was 24 cents over July futures. That is historically almost unheard of in this part of the world. The first hint of a weakening corn market will be slippage of the basis. Until that happens the futures should have a firm underpinning.
The surprising part of the market today was the positive close of the new crop soybean futures market. While it was not raging bullish, the ability of the price to stay positive in the face of a nice rain with more to come is a good sign. Maybe the rain was not wide spread enough to cause a general sell off. Regardless, I will take a close into positive territory any day instead of a crash.
The other big factor to be aware of in today’s market is the imminent change in the seasonal price trends. Long term charts of both the corn and soybean markets show a high for the weather rally coming at the end of the week of June 17. The average date for the top in the corn market is June 20. The top in soybeans is June 21. Timing of weather rallies are notoriously difficult to predict. However, price moves are significant enough that anyone with old or new crop grain to sell should be aware that the calendar is warning that weather rallies do not last forever.