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Weather market already underway - Roy Smith
Grain market action this week confirms a weather market before the growing season even starts! Around here there were a few planters in the field on April 12 and 13. Very few acres were planted before the cold wet weather set in again. Quite a bit of nitrogen fertilizer and herbicide was applied in the few good days we had. I am just as glad I did not get any nitrogen applied because some of it is probably already leached out of the root zone considering that three and a half inches of rain fell in the last ten days.
Some fields are turning green from the winter annuals that like the wet conditions. It will be time to hit those pests hard when the weather does finally change. Last fall’s post harvest herbicide application looks really good right now. In my case it was done on land that is subject to flooding from the Missouri River, which is nearly bank full already. The Nebraska state climatologist is warning that there could be both drought and flooding before the 2011 crop comes in next fall. Double trouble from those conditions is not as unusual as you might think.
A good thing about being an old guy is that I can remember 42 years of weather problems in my farming career. There are three types of weather rallies in the soybean and corn markets. The first is delayed planting. The second is drought during the growing season. The third is harvest delays from cool conditions or too much rain that slows harvest progress. Each of these is accompanied by its own peculiar type of price action.
Delayed planting from conditions being too wet does not cause much of a rally unless the supply and demand situation is already tight. The latest planting in my farming career was in 1982. That year I did not get the first corn planted until June 1. Because there were adequate supplies from the previous year, the prevailing attitude was “rain markets grain”. Prices were in a down trend from May all the way through harvest.
In 2000 the weather was too dry for good crop production going into the planting season. I was ready to give up on good yields when it began to rain in early June. It rained 15 inches in six weeks. So much for the weather scare!
Late planting is giving farmers an opportunity to make sales into a market that is discounting for reduced production. In my 42 years the crops have always gotten planted. If it should happen that this is the year that breaks the rule, we can only imagine how high prices might go. When making the decision when and how much to sell, remember that prices are starting from very high levels.
With cash soybeans over $13 and cash corn over $7, there is room for prices to move down as well as up. The prospect of having prices shoot higher from current levels tempers the enthusiasm for making big sales of new crop grain. Each farmer has to evaluate a wide variety of economic and agronomic factors, including how comfortable they are of having a good crop under less than ideal weather conditions. These factors need to be weighed against the possibility of prices falling from very attractive levels.
Varying degrees of production risk, both from too much rain and the potential for mid summer drought, make it impossible to make general recommendations for new crop sales. Remember that April and May have historically been good months for making both old crop and new crop sales. No one knows at what point the price break will come. Chances are it will be a surprise to most of us!