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Don't bet on the weather - Roy Smith
In April I wrote a column entitled “Weather Woes." This column could easily be version 2 of that piece. I live and farm in a part of the grain belt where it does not rain every time the crops need moisture. Most people consider Nebraska a dryland state. For the most part that is true. I reside in Cass County which is the least irrigated county in the state. We do not have bountiful groundwater, and the terrain does not lend itself to running center pivots. Another reason is that yields with irrigation are not high enough to offset the cost of pumping water. And, we are about as likely to suffer from too much rain as too little.
Without the benefit of irrigation to offset the occasional need for moisture, farmers are left to less reliable methods of coping with the unusual year when the rains just do not come as expected. For the most part, “grin and bear it” works about as well as any of the management techniques employed by the average farmer. With over a month since the last significant rain, my thoughts turn to finding comparable years when it has been too dry to produce an average crop.
Those of us with gray hair remember our fathers telling about the dry years of the 1930s. 1930 was accepted as the driest of those years. It was closely followed by 1936. The year 1935 was dry but not as bad as the other two. Having studied my dad’s farm records from that era, I can attest that conditions were desperate in those years.
My earliest memories of drought are from 1953 to 1956. That period is etched in my brain because I was trying to raise enough money to attend college. With poor crop yields and payments to make on the mortgage, my parents could not help me. At that time every farmer had a small cow herd. Consequently they also had a few acres of alfalfa. I got enough money from throwing hay bales to survive the first two years at the university. Thirty years later I paid for the abuse I did to my body when both shoulders needed rotator cuff surgery. Nonetheless, I got through two years of college until I could find other financing.
The 1970s were likewise dry years. The years from 1974 through 1977 produced almost no corn and poor soybean yields in my area. They were especially frustrating when farmers in other states got good yields with exceptionally good prices and eastern Nebraska farmers were suffering. Good weather returned in 1978 and continued through the 1980s except for 1988. Even that memorable year was not bad around here.
Farmers figured out that there had been a period of drought very 20 years beginning in 1934. That being the case, 1994 should have been a dry year. It was such a common belief that some farmers based their cropping plans on that year being a crop failure. One individual who was so convinced that 1994 would bring drought that he planted all soybeans in anticipation of a corn crop failure. That subsequently turned out to be a poor decision when corn yields were very good in 1994.
Basing crop decisions on the probability of weather events is a risky business. In the case just mentioned, with only three groups of years in the 1930s, 1950s and 1970s, the sample size is too small to have any validity. I never trust data that has a sample size of less than ten years. Five-year graphs are interesting to look at. To have any statistical basis a sample with more years is much better.
So where does that leave us today with no rain in over a month and prices in the middle of the latest trading range?
The average of the 30-year May soybean futures shows an early summer low on May 29, followed by a weather rally peak on June 21. The early summer low this year was right on schedule, coming on June 1. This was followed by a rally of 91 cents through today. The weather rally peak shows on the long-term chart to be one week ahead of the government acreage report. If we get some rain and if crop conditions improve, the timing of the next market peak could very well be close to what the long-term charts show.
If there is no widespread rain and hot weather continues, all bets are off. Any major weather problem will cause all rally calculations to go out the door. Weather rallies tend to end before the weather changes. This makes the timing of sale during this important period very difficult.