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WANTED: Rain, rain, and more rain

Ray Grabanski 06/06/2012 @ 11:00am President, Progressive Ag www.progressiveag.com

This is the time of the year, moving into mid-June, when the importance of US weather on grain markets is paramount. Good weather, for the next 45 days, can translate into a very large corn crop, which is the big dog of all grains.  

The production of US corn is perhaps the greatest influence on the grain market, in general, as corn has the largest acreage planted of any US crop, and also has universal usage requirements including for food, fuel, and livestock feed.  So, as the corn market goes, often so goes the rest of the grain market.

Currently, we have a very early seeded crop that has started to develop some topsoil moisture shortages among key states (IA, MO, IND, ILL, OH).  

The lack of rainfall not only has depleted topsoil moisture levels, but the weather pattern of less-than-normal precip established the past five weeks is concerning for weather watchers.  While the early seeded crop has the potential for above average or even record yields, we need moisture to produce that bumper crop.  The next five days are forecast to be relatively dry for that region, but the 6-10 day and 8-14 day forecast turns wetter!  In fact, the forecast says not only will we be wet, but the warm temps will cool off to more moderate levels.  If that forecast is accurate, we could see a significant improvement in yield potential.  

But if that forecast changes in the next 5 days (and there will be 10 forecast updates during the 5 days, 2 per day), then the market could see significant upside potential.  

As is typical this time of year, the three market factors most important to watch the next 45 days are weather, weather, and you guessed it, weather! This is a most critical time period for corn, but it also sets the foundation for the US and Canadian HRS wheat crop as well as the start to the US soybean crop.  Its often said that July weather determines corn yields, while August determines soybean yields.  With a crop seeded 1-2 weeks early, we might even be able to move that up 10 days to 2 weeks.  

So, we are back to watching the skies for now.  Pro Ag yield models, so far, suggest a corn crop slightly above average or 'trend', a winter wheat crop that looks like it will be a record shattering yield (48.5 bu/acre vs. 47.6 currently forecast by the USDA), and a soybean crop that at least was off to an early start.  So, looking forward to the June USDA report, one thing we can forecast is that winter wheat yields will likely be hiked in the coming report, setting a somewhat negative tone for the June report.  There shouldn't be much information for corn and soybeans (perhaps some yield updates for SAM crops), but for the most part the June S/D report should be uneventful.  

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