Content ID

260030

Lots of Crop-Weather Talk Circling the Trade

The past few weeks have seen weather that was much warmer than normal across the Corn Belt and northern Plains, with rainfall amounts also less than normal. That had the market concerned about drought spreading from the western HRS Wheat Belt into the Corn Belt, and markets were rallying as a result (with HRS wheat leading the rally). However, in the past week some rainfall did come in the Corn Belt and northern Plains, and soil moisture levels and crop conditions remained about steady after falling significantly in recent weeks. That has the market wondering what is coming next: Will we return to a dry weather pattern? Or will more normal weather lead to an improvement in crop yield potential?

There is very little rain falling in the U.S. today (6/20), just some scattered showers in Minnesota/Wisconsin border and the far southeast U.S. The seven-day forecast has temperatures now below normal for most of the U.S. and Corn Belt, with precipitation forecasts wet in the southeast and eastern Corn Belt, and dry in the northwest and much of the western Corn Belt.  

The eight- to 14-day forecast has temperatures normal to below normal in most of the Corn Belt. The central Corn Belt is forecast to have above-normal precipitation in the important states of Iowa, Illinois, Indiana, Ohio, and Missouri with normal precipitation for Kentucky and Tennessee. The rest of the Corn Belt will see mostly normal precipitation, with the far west seeing some below-normal precipitation. This is not a particularly threatening forecast over the next two weeks.

The crop conditions and progress report yesterday afternoon, 6/20, was supportive to HRS wheat as conditions declined another 4% to 41% rated G/E, down significantly now from last year’s 76% rating. This in spite of rains last week that caused many grain traders to expect an improvement in conditions. Barley conditions also declined 8% to 64% rated G/E, down from 77% last year. That supported HRS wheat overnight, with 12¢ gains after starting even higher.  

Corn conditions were unchanged at 67% rated G/E, down from 75% last year. The Pro Ag yield model was fractionally lower at 164.5 bushels an acre, down 0.02 bushels an acre from last week and compared with USDA’s 170.7 estimate. Corn emergence is 98%, equal to average. Soybean conditions improved 1% to 67% rated G/E, and are now 96% planted, 3% ahead of average, with 89% emerged, 5% ahead of average. The Pro Ag soybean yield model is at 46.4 bushels per acre, well below USDA’s 48-bushel forecast. 

Winter wheat conditions were rated 49% G/E, down 1% from last week and compared with 61% last year. The Pro Ag yield model for winter wheat was fractionally higher at 50.04 bushels per acre, slightly above USDA’s 48.8-bushels-per-acre estimate in June.   

Cotton is 94% planted, 2% behind the normal 96% planted, while conditions declined 5% to 61% rated G/E, still up from last year’s 53% rating. HRS wheat is 15% headed, 2% behind the normal 17% headed at this time. Sunflowers are 93% planted, ahead of the average pace of 77% by 16%. Sorghum is 86% planted, 1% ahead of average, with 17% headed, 1% behind the average pace. Sorghum conditions declined 1% to 66% G/E, down from last year’s excellent 70% rating. Winter wheat is 28% harvested, up 3% from the average pace. Oats are 60% headed, equal to average while ratings dropped 1% to 66% rated G/E, down from 70% last year. For most of these crops, it looks like about average conditions, meaning 2017 could be an average crop (not a bumper crop but not a crop failure, either).  

Moisture conditions improved 3% in topsoil rated adequate/surplus to 72%, still 2% below last year’s 74% rating. Subsoil moisture declined 1% to 77% rated adequate/surplus, still 1% behind last year. It was good to see soil moisture ratings rebound after some of last week’s rains; this helps to provide an improved cushion against drought. More importantly, it reverses the significant moisture level declines from the previous week, when drought was threatening the crop by locking in that weather pattern for a longer period of time (and traders were concerned with this).  

Overall, this week’s crop conditions report provided little additional input into the major crops (except HRS wheat, which was bullish). Weather for now doesn’t look threatening, either, so we could see more sideways-type trade in corn, soybeans, and winter wheat (but HRS wheat is chugging higher). So the weather seems neither bullish nor bearish right now, but just about average. There is an old saying, though, in the trade, that if you aren’t sure if the weather is bullish or bearish, then it’s bearish (because that means crops are not threatened anywhere with clearly adverse 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.

This material has been prepared by a sales or trading employee or agent of Progressive Ag Marketing, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Progressive Ag Marketing's Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions. 

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The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Progressive Ag Marketing believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that advice we give will result in profitable trades.

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