Trading the 'stall-out'
Traders in the pits in Chicago trade fear, not fact. And, right now, there's a fair amount of fear as to whether the 2011 corn crop will meet the expectations of a year when experts agree farmers need to raise a monster crop.
Now, enter the major players in the grain markets today. The index funds moving the grains today are enormous compared to the ag funds that weighed on the trade in the past, and the longer planting delays linger, the more nervous those funds -- and their positions in the trade -- become.
"They're living and dying by these charts," says PFGBest.com grain market analyst Tim Hannagan. "They trade fear, they don't trade fact. I remember when it was $5 to $10 million ag funds trading these. Now, we're talking $10 billion tech funds."
Hannagan was one of a trio of panelists at Thursday morning's Agriculture.com Marketeye Roundtable, an event that also featured University of Illinois Extension agronomist Emerson Nafziger and National Weather Service ag meteorologist Steven Rodriguez. Panelists discussed the current weather outlook, both long- and short-term, as well as the agronomic impacts of that forecast and finally, the effects of those agronomic changes on the grain trade.
Looking skyward, the theme that's paced the weather over the last month in much of the Corn Belt looks to continue, Rodriguez says. Though the La Nina pattern -- one that's characterized by wet, cool conditions in the Midwest -- looks to be abating as the summer rolls on, it may be too late to cause enough of a shift in planting conditions to matter.
"La Nina is expected to weaken over the next couple months, which should help things in the long term, but despite this weakening, we anticipate it to last through the next month into June," Rodriguez said Thursday. "Expect to see above-normal precipitation in the areas where we've already had above-normal precipitation." Beyond that, he says the 2-month outlook tends to remain on the cool, damp side in the Midwest and dry and warmer in the Plains.
So, what's it mean agronomically? Aside from causing a lot of jumpy nerves and apprehension when the clouds build for a lot of Midwestern farmers, Nafziger says it's really too early to get too worried just yet. That's based on conditions right now, though, and if things continue to stay cool and damp for too much longer, things could unravel quickly.
"It's a stall-out like we really haven't seen before. We can raise a good crop with a late start, but, the chances of that are diminishing. We're hoping still with our fingers crossed...We're hoping we can still get a very good crop,"Nafziger said. "Certainly May 5 is not a late date to plant corn. May 10 or 15 isn't disastrously late.