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Weather, weather, weather-Ray Grabanski
The market now is dictated by three main items: Weather, weather, and weather!
After all, it's July and the heat dome of doom has set itself up in the central Corn Belt where it is providing heat to nearly the entire US growing area. While that is of some concern, it also is accompanied by a forecast that allows some showers and rainstorms to continue to come across the US, which provides a little different scenario than "hot and dry". Instead, it's "hot and wet" for a good share of the northern Plains and eastern Corn Belt, which should be a better weather pattern for their growers in the coming months.
We don't seem to have as much experience with warm and wet weather patterns, as typically they don't go together for an extended period of time. It also is an unusual year, in that the planting progress was slow. So, the crop is behind normal development and in need of a certain amount of heat to help it make maturity before a frost. So at the onset of this wet, soggy year as it started this spring, warm weather for a period of time will be mostly beneficial to a point.
For example, the Pro Ag yield model for corn rose to its highest level in 2011 on the Monday, July 18 crop progress report, with it rising to 160.6 bu/acre vs. the current USDA projection of 158.7. Actually, the yield potential expanded last week at the onset of the heat!
But there seems to be more agreement that this week's heat is starting to do some damage, as the crop is starting to tassel and hit the reproductive stage of development. That turns the tide a bit, as during pollination a lot of bad things can occur with excessive heat. While the bulls have the market firmly in their grasp today with runs near yearly highs in corn, this summer isn't over yet, either. The weather pattern can change in a heartbeat, and when/if it does a whole lot of weather
premium will need to come back out of the market.
So, the real question is how long the heat will last, and how much damage to the crop yield potential will occur from the record heat currently experienced across the Corn Belt? And will it abate quickly, essentially leaving us with just another week of warm weather to help the maturity of the crop?
These are some of the questions that has to be on the minds of nearly every trader, farmer, grain handler, and brokerage house's mind lately.
Will we knock down the corn yield in the final analysis 2 bu/acre, 5 bu/acre, or 10 bu/acre? With relatively tight stocks to begin this year, we really don't have the room to have a much below normal crop in 2011. On the other hand, we can't really produce a below average crop in 2011, as demand is much too large for that.
So everyone is stuck watching the weather, or more accurately the weather forecasts which are updated 2x/day. As a private pilot I've enjoyed talking pilot talk with other pilots more than anything, and one of the things we always joke about is the weather forecasts, which are never inaccuracies of weathermen are the reason we call them "weather guessers". You see, no pilots call weathermen weather forecasters, as we well know the changes that can occur in a weather forecast in just 24 hours, and all of a sudden what was great flying weather has you locked in somewhere where you don't want to stay, waiting for the weather to clear. Been there, done that! I wonder how many of these changes we'll have from our weather 'guessers' over the next 40 days?
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