Ray Grabanski: Spring markets
As we move into spring, we've already had the big March acreage and stocks reports, and the strong market reaction to the upside due to the tighter than expected corn stocks. The April USDA report wasn't nearly as positive, but the market reacted positively anyway since they just assumed that USDA expected price rationing such that stocks of corn will not get below 675 mb (in other words, prices will get high enough so that we will have enough stocks left anyway).
We've already rallied $1 or more in nearby corn futures, and now prices are looking ahead to what the spring is going to bring US producers in the form of weather. Weather is important now, as early planting usually means an above average crop is possible with the right weather in summer, but a late start to planting usually means trend yields even can be difficult to achieve.
The weather forecast is not good today, with wet/cool weather forecast for most of the US for the coming 2 weeks. That is going to mean a relatively late start to the crop this year if accurate, as little crop should be planted in April if we get another two weeks of wet weather across the Corn Belt. That means a late start to planting in 2011, and it just might mean another boost in new crop prices for corn and HRS wheat. Today forecasts include a very wet two-week period coming up for the corn belt and most of the growing regions of the US for corn, soybeans, and HRS wheat. This is the area where planters would like to be rolling now, but if the weather doesn't cooperate then no matter what the best laid plans of mice and men are, they get changed in the end (does that mean more soybean acres, less corn and HRS wheat?).
About the only area where weather is not forecast to be wet the coming two weeks is in the already parched HRW wheat country - about the only region in the country that really wants rain, and they are forecast to be relatively dry for at least the coming 7 days (except KS). TX and OK are notably absent from the rain forecasts of the coming week, but even these two parched states are forecast to participate in the wet last week of April - when even this parched area is forecast to get rain.
So far, it has been almost uncanny how every part of the country that doesn't want rain keeps getting it, and the HRW wheat area just a few hundred miles away is in dire need of rain, and isn't getting it! That would be big news if the Russia drought was still in effect, but most of the FSU countries (especially Ukraine) have had cool/wet conditions most of this spring, too, effectively eliminating the drought threat that could have lingered from last summer. So now the FSU countries are expected to bounce back in wheat production from last year, and it's the US that is struggling so far with 2011 production prospects.