Mother Nature back in the game

April 5, 2009

northeastern-iowa-20092Mother Nature is making her seasonal appearance in Chicago Board of Trade markets and will be one of the big price drivers this week for grains. 
    
Planting time for corn is approaching in the Midwest and winter wheat, dormant since autumn, is reviving for a sprint to early summer maturity. But a freeze is forecast for the heart of the U.S. hard red winter wheat belt this weekend. In addition, the Red River Valley in eastern North Dakota, the heart of the spring-planted wheat belt, remains at risk of more flooding this month. 
    
The heart of the Corn Belt — Iowa and Illinois — could also be hit by a blizzard early this week, pushing back spring field work and delaying corn planting. Soy is planted later. 
   
“First, on Monday we’ll see a little bit of reaction to the weather that occurred over the weekend. We are especially going to watch potential frost freeze on Monday morning including the Delta and hard red winter wheat areas,” said analyst Terry Reilly at Citigroup in Chicago. 
    
Temperatures could dip into the low 20s degrees Fahrenheit in southern wheat regions such as the Delta soft red winter wheat fields of Mississippi and Arkansas, raising fears about “winterkill” damage to wheat and eventual yield loss. Still, wheat is a hardy grass and the season is still young. But any weather jitters could spur speculative buying and add to last week’s rallies.
    
On Friday, CBOT corn for May delivery <CK9> closed 4 percent higher on the week at $4.04-1/2 a bushel. May wheat <WK9> ended at $5.63-1/2, up 11 percent for the week, while May soybeans <SK9> rose 9 percent to $9.95-1/2. 
   
Part of that bounce in grains, especially soybeans, was due to the government’s U.S. shock planting estimates on Tuesday. The U.S. Department of Agriculture pegged soy plantings at 76 million acres, 3.6 million fewer than analysts expected. U.S. corn seedings were also forecast higher than expected at about 85 million, compared with 86 million a year ago. 
   
Each session after the report, soybean prices gained on corn with the price ratio between new-crop November soy and December corn closing at 2.12-to-1 on Friday — a big jump from a week earlier when it closed at 2.05-to-1. 
   
Historically, a ratio under 2.2-to-1 usually encourages corn seedings, while anything above tends to favor soybeans. 
   
“The cold, wet weather is underpinning corn. But it didn’t give it much of a lift,” said one CBOT floor broker. 
   
Some key areas of the Midwest have seen 200 percent of normal precipitation and remain too chilly to plant corn. Farmers like to wait for soil temperatures to reach 55 degrees (F) before planting. So far that zone is only as far north as Texas, eastward into the Delta region. 
   
USDA usually starts reporting U.S. corn planting progress by the second week of April, when 5 percent to 7 percent is seeded. But the agency will release its first crop progress update on Monday afternoon, with winter wheat conditions a key focus. 
   
“We are looking for above-average ratings for soft red winter wheat and white winter wheat, but below average for ratings for hard red winter,” Reilly said. 
   
Aside from the crop weather and daily conditions, outside markets will still play a role in grains — Wall Street stocks, crude oil and the dollar are keenly watched as touchstones that could point to economic recovery and, thus, potential demand. The fourth-straight weekly advance on Wall Street, with Dow Jones industrial average surpassing 8,000 on Friday — closing up 39 points at 8,017 — definitely buoyed commodity trader morale. 
   
“We did see some active fund buying (last) week,” said grains analyst Shawn McCambridge with Prudential Bache Commodities, who pointed to talk of money finally coming off the sidelines. 
Also of interest will be USDA’s monthly world supply-demand report due on Thursday morning. Traders will zero in as usual on projected end-season stockpiles, especially for soybean stocks this autumn given the smaller-than-expected March 1 U.S. soy stocks data that USDA reported last week.

Photo: Northeastern Iowa crop field taken by Christine Stebbins in late March. The region was hit by spring blizzard on Sunday, dashing farmers’ hopes of an early planting season.

Comments

Christine,

Good timing on your discussion of the impact of weather on planting schedules. We certainly always hear plenty of chatter about delayed plantings at this time of year, and it is guaranteed we’ll get more and more of it over the coming weeks. However, it’s important to remember that despite the slow starting pace of a year ago – as well as the devastating flooding seen in Iowa – the average corn yield of the US in 2008 was close to an historic high when all was said and done.

So, while we’re going to get a lot of chatter about how the cold, wet conditions will likely derail early planting intentions of corn, no one will be able to get a truly solid handle on exactly how many acres will be planted – and how the crops will fare – until very late into the season. Until then, our recommendation is to not get too caught up in talk of abandoned acres, and instead expect the American farmer to find a way to get the job done, as he always does.

Thanks, Gavin from Ehedger.com

 

Gavin,

Here in Eastern, NE we have 4-6 feet snow drifts in our ditches along roads and 2-4 inches of snow in the bottoms of our rolling hills in our soon to be corn fields. 111-113 day corn will not get put in on time and guys are worried yield will be reduced, for sure. Not to mention we don’t have any of the high priced fertilizers on yet. Ground is froze every mourning this week. With cool wet weather forcasted this weekend we are in for another delay in heat unit accumilation.

Jim

Posted by Jim Wallman | Report as abusive
 

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