You are here
Weather, weather, and weather drive July markets, analyst says
It’s that time of year again – the time when there are three important market factors for grains: weather, weather, and weather.
We could sell 50% more exports per week in the summer, and the impact of that pales in comparison with the effect on supply and demand with weather.
For example, in 2012 we lost about 2 to 3 bushels per acre per week of potential corn yield during that 10-week drought. Therefore, every week we lost 180 to 270 million bushels (mb) of corn production. There is no other fundamental change in such a short time that can occur compared with the impact of weather on potential corn yields in July.
In comparison, we export on average 18 mb of wheat per week, 41 mb of corn, and 39.5 mb soybeans. A 10% increase in corn/soybean exports is only 4 mb (2 mb wheat), and +20% is only 8 mb corn/soy exports (4 mb wheat). So, while the biggest demand impacts can be increased exports, they pale in comparison with weather in July and August.
There is only very scattered rain in the U.S. today, with rain moving through South Dakota and into Iowa, as we start the day (but almost nowhere else in the Corn Belt). Another small dot has rain falling in parts of Louisiana. The next seven days will be mostly dry, with the center of dryness in Illinois and Indiana. However, one forecast today is bringing more rain into the eastern Corn Belt in the eight- to 14-day forecast as well as the next seven days.
However, this happens frequently in droughts as the tendency of forecasters is to move back toward ‘average.’ However, the NWS six- to 10-day and eight- to 14-day forecasts were still warm and dry last night.
Crop progress reports showed corn conditions down 2% to 71% G/E and unchanged soybeans at 71% G/E.
However, the Pro Ag yield model rose 0.7 bu/acre in corn to 178 bu/acre, and up 0.4 bu/acre soybeans to 50.2 bu/acre. Both are the highest yield estimates of the year as the crop continues to thrive on the soil moisture levels, which were high to start the season.
We used up another 2% of the topsoil levels and 4% of the subsoil, dropping to 64% adequate/surplus topsoil and 68% subsoil. At some point, we will run out of soil moisture to borrow to make up for rainfall shortages, but for now things are still OK.
It’s July, so there is a limited amount of time that corn can get hurt. But soybeans could have a bigger problem if rainfall doesn’t soon increase.
Ironically, after early corn planting we still have silking behind normal at 10% vs. 16% normally. Soybeans are ahead at 31% blooming vs. 24% normally, but only 2% podding vs. 4% normally.
Sorghum conditions also improved 3% to 48% G/E, still well below last year.
Winter wheat is 56% harvested, 1% ahead of normal as that harvest is going well amidst hot/dry conditions (perfect for harvest). However, winter wheat conditions dropped 2% to 51% G/E. HRS wheat conditions improved 1% to 70% G/E, as some rains fell in the region (some very heavy).
Barley conditions dropped 2%, however, to 73% rated G/E.
Overall, the crop is developing OK, despite hot/dry conditions depleting soil moisture. So far, we had enough stored soil moisture and scattered rainfall to prevent rapid declines, but eventually we need more rain to prevent further declines in both soil moisture and conditions.
Ray can be reached at email@example.com.
Ray is president of Progressive Ag Marketing, Inc., a top-ranked marketing firm in the country. See progressiveag.com for rankings and link to data from Top Producer Magazine and Agweb.com.
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.
DISTRIBUTION IN SOME JURISDICTIONS MAY BE PROHIBITED OR RESTRICTED BY LAW. PERSONS IN POSSESSION OF THIS COMMUNICATION INDIRECTLY SHOULD INFORM THEMSELVES ABOUT AND OBSERVE ANY SUCH PROHIBITION OR RESTRICTIONS. TO THE EXTENT THAT YOU HAVE RECEIVED THIS COMMUNICATION INDIRECTLY AND SOLICITATIONS ARE PROHIBITED IN YOUR JURISDICTION WITHOUT REGISTRATION, THE MARKET COMMENTARY IN THIS COMMUNICATION SHOULD NOT BE CONSIDERED A SOLICITATION.
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.