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Unusual year?

04/19/2013 @ 2:11pm

Almost every year there is something unusual about growing conditions or markets. In 2011 the problem was flooding in much of the Missouri River drainage area. Last year it was one of the worst droughts in history. Now it seems as if the going concern is the cold and wet weather in much of the crop growing area of the country. When I am faced with some kind of unusual condition, I look for what analysts call analog years.

When I think of years when the weather in April and May was cold and wet, the first year that comes to mind is 1982. That was the year in my farming career when planting was latest. It was before no-till was the planting method of choice. All of the nitrogen was applied in the form of anhydrous ammonia. Planters larger than six, 30-inch rows were almost unheard of. Planting was much slower at that time than it is now.

I had all of my nitrogen applied and tillage done by April 30. I was ready to plant corn the next day. I planted sweet corn that evening but decided to wait until the next day to start on field corn. That opportunity did not come until June 1, a month later. All of my corn that year was planted the first week of June. Farmers were concerned that the delayed planting would be disastrous to yields. Even more frustrating was the concern that the market was not recognizing the potential yield loss from the late planting.

In fact, the market never did bid any risk premium into prices of soybeans or corn any time during the growing season. That year was one of very few years when there was absolutely no weather rally that usually comes at some time during the summer. A quick look at price charts from 1982 shows that the spring high was in early April. From that time on, prices were in a gradual downtrend throughout the summer. They finally made a harvest-low about the time harvest was wrapping up.

There have been other years when weather delayed planting, 1984 and 1995 come to mind. Delayed planting does not seem to be nearly as important to grain prices as prolonged drought. Even minor dry spells are more likely to cause excitement than late planting. I have learned from 44 years of farming experience that any rally in grain prices caused by delayed planting is a selling opportunity. In seven years when there was planting that could be classed as late, only in 1995 did the rally turn into a full-fledged bull market. Most of the rally that year was the result of dry weather later in the summer.  

I remember 1982 because that year my family took a trip to Washington, D.C., over the July 4 weekend. Our local high school band marched in the Independence Day Parade. When we left home, the corn was barely knee high. I anticipated what when we returned to Nebraska, grain futures would stage a big rally caused by the lateness of the crop. It did not happen! Corn yields were somewhat reduced, but still acceptable. Soybean yields were good. The corn required a lot of artificial drying, which wasn't unusual back then.

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