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Weather boosts plantings
While lots of attention recently has been on the latest reports and data, U.S. weather continues to impress. After the warmest weather on record for Jan, Feb, and March for most of the US, which melted away all snow and opened up the fields for potential early planting, we start to hit the insurance planting dates for crops.
Typically, the chance to plant early is seized upon by farmers, but this year some (perhaps unwisely) were waiting to plant crops until the calendar said they should be planted, not the field conditions. The worry is that too early of planting will result in poor stands if the seed sits in cold soils. That exposes seed to slow germination and the potential for heavy rains to rot the seed in the cold soil before it gets a chance to germinate. But will that occur this year? And is giving up early development of corn and avoiding summer heat for pollination worth waiting for?
Regardless of the decision farmers make, it's been quite clear that just having a choice of early planting, or waiting to plant in mid-to-late April (if weather cooperates) is at least a lot better than the last few years, in which early planting wasn't an option for anyone. In 2012, farmers do have a choice, and clearly the choice this year is a great one to have. With wet weather forecast for the coming 2 weeks, will it be wiser to wait to plant, or are those that already have crops in the ground (and some already emerged) in better shape? Typically, it seems erring on the side of planting is generally a better idea than waiting, especially when conditions were as good as they were early this year for planting.
Growers were able to plant in ideal conditions (not mud), and that is worth something!
While it's clear that HRS wheat, barley, and corn is finding early planting in excellent condition, it is also true that winter wheat thus far has made a miraculous recovery from last year's drought-affected crop. Not only is the crop an improvement from last year, but also right now Pro Ag yield models suggest a record shattering crop is currently growing, with over 48 bu/acre yield potential - nearly 2 bu/acre above
'trend' or about 5%. This is truly a remarkable recovery from the crop disaster we suffered through last year in the HRW wheat states of KS, OK, and TX. Truly this will result not only in larger HRW wheat crops, but feed grains and oilseeds planted in this region (including corn, soybeans, sunflowers, and sorghum) will all see remarkable recoveries from last year's drought reduced yields. Yes, even the most drought damaged of areas from last year have seen a dramatic recovery from those abhorrent conditions.
Pro Ag notes that there are very few dry spots across the US, as we start this early spring planting (a corner of IA and a portion of MN only), and even these areas are forecast to get generous rains over the next few weeks. This will provide nearly ideal early seeding conditions across the country. It will be surprising if 2012 is not one of the best planting seasons in memory, or perhaps even on record. Given these types of early season conditions, Pro Ag would expect the market to have difficulty rallying in what is typically a period where weather premiums are put into the market. If markets can't rally during the 'weather premium' time frame, it could be "look out below" for the rest of the season.
Pro Ag notes that while early season planting might pressure grains this spring, there is also the risk of an early spring frost damaging a very early HRW wheat crop developing across the country. However, in the next two week forecast, there is virtually 'normal' temps forecast for most of the period - no threat of a cold snap in April yet. That could help the winter wheat crop dodge a bullet. With good soil moisture and very early development, this might be the only bullet left for winter wheat to dodge before harvest (it's so early it's not subject to potential heat damage in June as it will already be mature by then).
Add to future problems that another 6.5 million acres of CRP will be coming out in September, 2012 and the possibility that 65% of it or 4 million acres might be added to land in 2013 forward. That could pressure those later years, and leaves the future looking more bleak for grains as we move forward. The extra 10.5 million acres of 2011 PP is also ominously looming over the market (only 2 million of it was 'found' for the March 30 report, so 8 million is still floating out there).
Given a great spring start, it's likely much of it will also be planted.
Pro Ag is getting more bearish, and the downside reversal with the April S/D report this month might be the linchpin to end the current uptrend, especially in soybeans. Is it time to hedge up strongly again?
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