U.S. weather moving into the spotlight for grains trade

April 12, 2009

northern-iowa-field-20091A cool, wet spring across the heart of the U.S. crop belt is making Chicago Board of Trade grain traders nervous about the upcoming planting season, keeping them focused on the latest weather outlook.
Farmers are already behind on fieldwork after rains last autumn prevented them from applying fertilizer to intended corn fields, usually a favorite jump on the spring planting season. 
“The only thing on the radar right now is weather. In a three-day time period there is enough to flip weather models around considerably,” said Greg Wagner, senior commodity analyst for AgResource, a Chicago-based consultancy firm. 
CBOT will be closed for Good Friday for the Easter holiday break but reopen on Sunday night for screen trading. 
Trade could be active and volatile then, as usual on a 3-day weekend during planting or harvest in the United States, the biggest single world exporter of wheat, corn and soybeans. 
On Friday, CBOT grain were hit by profit-taking ahead of the long break. But front-month soybeans still posted their first weekly close above $10 a bushel since February 8. 
May soybeans <SK9> closed 1 percent higher on the week at $10.07 while May corn <CK9> fell 4 percent to $3.90-1/4 and May delivery wheat <WK9> dropped 7 percent to $5.22. 
The fifth consecutive weekly gain on Wall Street stocks aided sentiment. Optimism about the struggling banking sector came after Wells Fargo <WFC.N> forecast a record quarterly profit and fed ideas that the credit crunch — which has hit grains like all commodities — may ease a bit and feed demand. 
“The background factors of what the equity markets are doing, the psychology around the possibly of recovery — is having a big impact on our markets too,” said senior oilseed analyst Anne Frick. 
But the seasonal fundamentals of the U.S. planting season — how many acres will go to which crop — remain the key. 
More than half the U.S. wheat crop is “winter” wheat, seeded in the autumn and then reviving to be harvested by July. But the bulk of cash crops — the 160 million or so acres of corn and soybeans — start getting seeded in April. 
Roughly 5 to 7 percent of the U.S. corn crop is planted by mid-April in a normal year. Corn not in the ground by May 20 in Iowa and Illinois usually tends to lose yield potential from a shortened growing season always facing threat of early frost in September, when the crop is normally “finishing.” 
The U.S. Agriculture Department has yet to report any corn planting progress as too few acres have been seeded. USDA is also unlikely to report any in its weekly update on Monday
“We are focusing on weather. As we start to see the forecast going beyond the middle of April — we are going to concentrate very closely on much field progress we can get down by late April,” said one CBOT trader. 
The Midwest still has snow on the ground in spots from last week’s late season dustings. The region was expected to get another soaking rain over the weekend into early Monday. Some spots could get more than an inch of rain. The U.S. Crop Moisture Index already shows the Midwest as abnormally wet. The upper Midwest could start see some breaks, DTN Meteorlogix forecaster Mike Palmerino said on Thursday. 
But rain clouds seem stalled over the southern areas of Illinois, Indiana and Ohio, key areas where soil temperatures should soon be warm enough to plant corn. 
One other fundamental CBOT traders were watching: demand.   Last week was the third straight seeing U.S. corn export sales above 1.0 million tonnes. China also keeps buying U.S. soybeans, extending its buying out of the U.S. and reluctant to book Argentine soybeans given recent farm strikes there. 
“What seems to be driving market behavior is certainly the pace of Chinese soybean purchases out of the U.S.,” said Rich Feltes, senior vice president at MF Global Research. 
Soy exports are now flowing out of the United States at a pace that looks to shrink end-season stocks this September to their tightest level in five years, analysts said last week. 
Traders are studying a newcomer to the CBOT markets, grain swaps, which debuted quietly last week. But these exchange-cleared over-the-counter deals, which experts tie in part to burgeoning industrial use of corn and soybeans to produce biofuels, may grow if users see the advantages.

Photo: Northern Iowa crop field taken by Christine Stebbins.

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