Market curveballs keep coming
The farm markets have been thrown curveballs for months now. For instance, in March the market was told that U.S. farmers would plant a record amount of corn in 2013. That was followed by Mother Nature's curveball, as wet conditions put the U.S. planting pace at record-slow levels. Market participants had to figure out if larger-than-life farm equipment would allow the U.S. farmers to make a quick recovery in planting.
As always, the U.S. corn crop, though considered smaller than first projections, did get seeded. In fact, the U.S. soybean crop, though planted beyond optimal dates, was able to get completed, too.
So, the marketwatchers were in limbo again. Now that the crops are planted, let the growing begin.
Wait -- another curveball in late June, courtesy of Mother Nature as heavy rains continued to flood fields in north-central Iowa, south-central Minnesota, and parts of Wisconsin. Meanwhile, a July hailstorm pummels young crops in south-central Iowa, and the U.S. wheat harvest is slowed by wet weather.
Perhaps Tim Hannagan, Walsh Trading senior grain analyst put it best in a midyear commodity report Monday: “It is not what you plant and when, but what you grow.”
To date, both corn and bean farmers have spent a month trying to complete planting, with one-third of the seeds going into the ground later than the preferred planting dates, he says.
Curveball after curveball, the markets gyrate in an attempt to figure out this 2013 crop growing season. And just when the trade thinks the market has digested the planting weather, enter even more market surprises such as: the USDA's bearish ending stocks data, and the end-of-June and end-of-quarter money shifts. Plus, there is talk of even more curveballs developing.
Or are there two possible upcoming events for the market to deal with?
As traders return from the July 4th holiday, new weather models indicate a heat ridge building for the Midwest. Mike North, First Capital Ag Senior Risk Advisor, says the hot, dry weather will cause a quick market reaction.
"There is talk of a ridge pattern bringing warmer, drier weather following the current rain system that is moving through the Midwest. The key to this conversation is that much of the nation’s crop is due to pollinate in the 3rd week of July. With bulls lacking anything in the way of news, developments such as this will be met with a quick response," North says.
Hannagan says he expects two or three events between July 1 and August 20 to impact the farm markets.
"Because our ending stocks inventory for corn and beans are historically low, lower than the last three years entering this period, we have to expect sharp and dramatic overpricing in the futures," Hannagan says.