(Archive photo of farm and dairy)
In response to planting progress in the US, the higher value of the dollar and Brazilian harvest progress, prices on the futures markets continue to weaken.
All of these factors are new. The market believed that sowing in this country was not off to a good start, but suddenly the NASS Crop Progress Report showed that progress was above average, although not by much.
The April 15 report put the seeding rate at 6%, higher than the recent average of 5%. Six states, including Ohio, don't have official acreage yet, but it's still only mid-April.
It remains to be seen whether planting progress will continue to be above average as rain is forecast for the Northern Plains, Iowa and Wisconsin. We expect an inch and a half. The 8 to 14 day forecast also calls for rain and if this arrives we would again expect delays.
Lows
Corn futures were sharply lower on April 15, with lead-month May futures falling 4 1/4 cents. Soybeans also saw a significant decline, with the price falling 15 1/2 cents in May. For soybeans, national planting progress was 3%, compared to an average of 1%. The market driving and biggest factor for soybeans has been the acceleration of crop progress in Brazil, which is now at 84%. This harvest had to be slowed by the rain and affected by worsening conditions due to the rain. In fact, they're on track now, and no one is talking much about expected weather-related damage to the state.
May wheat futures in Chicago fell 4 1/4 cents on April 15, followed by another 1 1/2 cent decline in early trading on April 16.
Looking at long-term trends, all three commodities are showing major, consistent breakthroughs since the highs. Corn futures peaked at $5.20 3/4 on October 20. The low came on February 23rd at $4.11 3/4. That means a loss of $1.09 on the chart. In March we recovered to $4.48 but were trading at $4.30 in early April '16.
May soybean futures peaked at 14.19 3/4 on November 15th. The low was $11.33 on February 21st, but we recovered to $12.26 3/4 on March 21st. We last traded at $11.55 1/4 on April 16th. May Chicago wheat futures peaked at $6.61/2 on Dec. 6, then fell $1.32 1/2 to $5.28 by March 7. On April 4th we had a nice bounce to $5.74 3/4 but are now trading back at $5.16 1/4.
Looking for trends
Spring is a time when it is difficult to identify trends. The next three weeks are always crucial for the punctuality of planting. For example, we now have predicted rain-related planting delays for large areas for a few weeks, but the forecasts are particularly difficult at the moment. If we miss the rain, we are ahead of normal. If we get it, we may be late, but the delays won't matter much until the first week of May as long as we catch up quickly.
Fundamentally, markets are weak, although we are trying to quantify the fact that we will increase soybean acreage and decrease corn acreage this year. It remains to be seen whether this prediction from the Planting Intentions report from late March is correct.
As the weather clears, farmers will exceed their expectations for corn just because they can in good weather. In many areas, farmers prefer to plant corn, but the economic climate currently favors soybeans.
Of course, it is the summer weather that largely determines the prices of corn and soybeans. Corn prices tend to rise until the end of June and are confirmed in the first week of July. August is the crucial month for soybean development. So anything can happen and it's hard to predict at this point. By the time analysts have good reason to predict the crop, it will be too late to do anything about it in terms of planting mix.
The reality is that even if we could predict prices, farmers will ignore the markets and focus on sowing for a few weeks. We are cheap, so problems with planting or crop development would tend to impact prices.
However, hope for improvement should not depend on problems. We never want to bet against the ability of the American farmer to produce a good harvest.
STAY INFORMED. LOG IN!
Latest agricultural news in your inbox!
Comments are closed.