Wheat freeze fizzling out?
No doubt, we lost a significant amount of wheat production (Pro Ag figures 100+ million bushels) which is likely three percent of the total winter wheat yield potential. This is perhaps the worst freeze damage in winter wheat country in a decade!
But one also has to remember that 2007 started as a record-shattering yield potential, with ideal moisture conditions and winter weather that got the crop off to a great start. Even given the devastating losses suffered two weeks ago, Pro Ag still estimates the yield potential of the 2007 crop at above average "trend" yields by at least one bushel per acre (46.6 bushels versus 45.6 "trend," but down from 49.1 two weeks ago).
This is no disaster crop like 2006 either, so one has to keep that in mind. What this freeze has done is taken wheat out of the summer feed bunk and put corn back in it in the place of wheat, raising the outlook for 2006 crop corn. But it also probably means more acres of 2007 crop corn as destroyed wheat acres are reseeded to corn/feed grains or soybeans/oilseeds.
With high soil moisture everywhere, its almost guaranteed that any wheat acreage destroyed will be replanted to another crop. If corn, its likely we'll get three to four times the wheat bushels off those acres, and thus the soft new crop corn market (and possibly even more feed grain supplies).
Pro Ag openly wonders if the grains markets rally in corn/wheat the last few weeks wasn't strictly on the freeze damage/cold weather of the past few weeks. If not for this unfortunate two weeks of weather, perhaps grain markets have turned bearish (note soybean price charts forming four-month lows)? We wonder if today's grain market isn't refocusing on the negative fundamental picture present in grains prior to the freeze losses. As we stated 2 weeks ago, without adverse weather (which we recently had), grain markets might be slanted more to the downside for the next few months.
So weather markets are now taking center stage in the grain markets, with U.S. weather forecasts dominating trade and pushing prices different directions, sometimes with 10 to 20-cent ranges. While delayed planting in corn (four percent planted versus nine percent average) is slow, this week's improved warmer/drier weather should allow more progress to be made (especially this weekend). Many soggy soils will need it to allow farmers in the field the last week of April.
It may take some time, but if we get another week or two of nice weather, it's likely planting progress would be right back on track again. Already, some planters are in fields for the first time the past few days, and these mostly dry areas/lighter soils are getting some work done (finally). That has taken the edge off the market.
Have we already passed our first weather related scare? Not only was it a "scare," but we also lost three percent or more of the 2007 wheat crop. And still, corn and soybeans have failed at critical levels to take out resistance (and in soybeans case, actually dropped to new recent lows). Even wheat has failed to run to new highs, although we have had a nice run higher back close to those highs. A failure here would form a very negative technical picture, indeed.