Cool Weather, Cool Markets
The weather has been quite cool for the month of May in most Corn Belt and wheat growing locations. That has brought some planting delays this spring, but for the most part, planting progress is on schedule for most crops in spite of some wet conditions as well. But the cool weather will start to become concerning to corn and soybean growers (especially Northern growers) as we need growing degrees to get the crop to maturity. We are reaching the end of the crop insurance planting period for corn in most areas, so corn is in danger of losing some acres if not planted soon. That means there is the risk of more soybean acres and less corn acres based on current weather patterns.
So far it has been cool, and the weather forecast for the next two weeks continues that trend, with cool weather forecast to last for most of the Corn Belt into mid-June. If the crop had been planted early, the cool weather wouldn’t be as concerning (such as it was in 2004 and 1994). This year, the crop actually got started planting a bit on the late side, and we basically caught up to near normal around the last half of May. So this is not necessarily an early planted crop, and therefore we will need some growing degree days to help it reach maturity. So if we stay cool, we may have to reduce projected yields some for corn and soybeans from trend yields. That will become friendly at some point, but perhaps we haven’t reached that point yet?
On the other hand, cool weather is generally good for wheat crops (both spring and winter wheat), as wheat is a cool-season crop and generally thrives in cool weather. It certainly has been cool for most areas in the month of May, and that probably is helping the winter wheat yield potential (at least if snow didn’t fall on it the last day in April). HRS wheat generally is benefitted by cool weather this time of year, too, so HRS wheat yield potential may actually be helped by the cool weather. Perhaps that is why wheat prices are struggling since the snow event in Kansas the last day of April.
In spite of the cool weather, soybean prices have been drifting lower the past few weeks, and last week dropped to the lowest levels in over eight months. We broke below the $9.41 July support area last week, and soybeans seem to be floating lower with little effort now. The cool weather is affecting soybeans as well, as the early crop development hasn’t exactly been stellar. But the possibility of more acres sliding over to soybeans from corn may be adding to the pressure on soybean prices.
Weekly export sales and shipments remain strong for most grains, one of the constants in the grain markets in spite of a lot of negative talk about exports. Yes, South America has a good crop this year and will present some strong competition to U.S. exports throughout the next six months. Yet, it is surprising that U.S. export sales and shipments are holding up quite well in spite of the large South American supplies.
There is more momentum in the grain markets to push corn prices higher recently, while soybean prices are dropping to new recent lows. Corn might be benefitting from ideas of lower corn planted acreage in 2017. That loss of corn acres might be having a negative impact on soybeans, too, as the expectation in most Corn Belt states is that the acres will eventually end up as soybeans. So soybean prices are coming under some pressure. Wheat keeps grinding lower, with today’s market doing more of the same after another cool weekend through Memorial Day. Winter wheat is getting closer and closer to harvest, and so far there has been none of the dreaded heat in Southern states that typically can trim winter wheat yields. In fact, it has been downright cool in HRW wheat country, and that is allowing wheat fields to push toward maturity without the typical heat stress that can come at this time of year for dryland acres.
So while grain markets may not be doing much recently, there are subtle hints this spring of some changes in the outlook for each of the grains. The cool weather may be more friendly corn than any other market (potentially losing both acres and yield potential), and more negative wheat (cool weather beneficial to yields?) and soybeans (more potential acres planted?). So far, there have not been major price implications of the weather yet, but we may be getting to that point when weather could start to have more impact as the summer wears on.
Will 2017 go down as a very cool year? What impact will that have on final yields? There is still plenty of time to impact the market by the summer weather.
Ray Grabanski is president of Progressive Ag Marketing, Inc., the top-ranked marketing firm in the country the past eight years. See http://www.progressiveag.com for rankings.
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