Market Monitor: Drumbeat of drought fades to an echo

The drumbeat of drought has been with us all winter. Grain prices have declined, farmer selling has slowed, and the talk has been that prices will recover, because, after all, we are still in drought in the Western Corn Belt.

Mississippi

This winter we listened to news that the Army Corp. of Engineers was not just dredging mud, but was removing rock from the bottom of critical sections of the Mississippi.

Well, this week the talk switched to the crews of volunteers that were passing sandbags to shore up levees so towns along the Mississippi and its feeder rivers could stay dry. The Big Muddy was expected to rise 10 feet, and barges were being parked for high water problems instead of low water.

The weather has changed in the west. Before we were talking about how we needed an inch of rain a week to keep the crop going because the ground was still dry.

Weather

Now we are talking about feet of snow that has fallen, 7 inches of rain in some areas, and more to come this week. The crest of water moving down the major trade route of North America is moving the hopes of high corn prices with it.

It is noteworthy that the market is focusing on the wet weather as a positive. Traders are not apparently worried about the delayed planting that is the other result of the current weather. It is more important that rain makes grain than that we still have only 4 percent of the corn crop planted.

Crop progress

Monday USDA released the second Crop Progress report. It shows that we bumped the corn planting up from 2 percent to 4, but that we are way behind the fast pace of last year when we had 26 percent in at this time.

The average for the U.S. at this point is 16 percent. Ohio is at one percent, with no progress in the last week. We had 31 percent in last year, and have a 2 percent average.

So, as you read this we have four or five days of April left, and no planting done. The long-term forecast is not friendly for planting.

The market believes that the weather will clear in time, and the American farmer will forego sleep to plant the crops in ten days or so. They probably will.

I have said before, and continue to say, that we are trading the old crop as a short crop. Areas of the country were very dry, and the corn crop especially was down in size.

As a result, we had a high price at harvest, and had every reason to believe that prices would trail off the longer the year went on.
That is how short crops behave. The caveat to that was the talk of dry soil continuing in the west. This week seems to be putting an end to that thought. We still need timely rains, but the start of the year has changed.

At marketing meetings this winter farmers have heard the experts offer the thought that prices for corn could be $3.75 to $8, depending on the weather. Big crop, small price.
Right now we have to worry about the small price, and about getting that ten days of frantic planting to get the year started.

On April 23, we have July corn futures at 6.211⁄4, which is so far down two and a quarter cents on the day. The recent high was at 7.173⁄4 March 27.
After that came, the report crash of March 28, and follow through to the low of 6.15 April 5.

Call it a round dollar loss

We rebounded to 6.471⁄4 April 10, but have lost a quarter off that to the 6.21.
July soybeans currently are trading 13.62, also down more than two for the day so far. The recent high was at 14.361⁄4 March 28, just after the reports. The recent low was 13.361⁄2 April 5. We bounced to the 14.00 level April 19, but the last few days have been negative with the rain gains.