Traders change focus to weather market

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Cornrows by Angie Garrett (Own work) [CC BY-SA 3.0 (https://www.flickr.com/photos/smoorenburg/3682186902)], via Flickr

The mood has changed in Chicago as market movers are now focusing on weather instead of the recent United States Department of Agriculture numbers that rattled the market.

Prices soared June 30 on the Chicago Board of Trade, fueled by the largest change in planted acres estimates in my memory. The USDA, which had predicted 97 million acres of corn to be planted in the March 31 report, revised that to 92 million acres in the June report, a five million-acre change.

The results were predictable but short in duration. December corn futures gained almost 42 cents in a few days, from June 26 on a sell-off before the report, to July 2, just after the report. November soybean futures gained almost 56 cents, from the pre-report June 29 $8.563⁄4 to a high of $9.121⁄2 July 6.

All about weather

So, why are we so much lower now? December corn futures were $3.373⁄4 July 14. November soybean futures were at 8.771⁄2. The USDA numbers are in the back of traders minds, but the last few trading days have been all about the weather.

The current weather has been great for corn and soybeans. We have had adequate rain in most areas, although there are dry spots. Temperatures have been high enough for optimum grain growth, but not hot enough to burn off soil moisture and crisp up the corn. The result has been a market that assumes the crops are getting bigger. That assumption may be about to change, but prices currently do not reflect it.

Weather reports have temperatures expected to get too high, and rain is always suspect as we move into tasseling and pollination over the principal areas of the Midwest. Farmers in Illinois report tasseling well along, and other areas will see it this week. This is the time when corn can use two inches of rain in a week, and it may not get it.

On the weather market, corn and soybeans have each dropped about 36 cents a bushel. This is the sign of things to come, or it is a change that is easily recovered if the weather goes south.

Wheat crop

Weather has already gone south for the wheat crop. There, we focus more on worldwide production, and other countries are struggling, although the U.S. crop is also losing bushels right now.

Reports hit the market last week of significant changes in outlook for E.U. and Black Sea region wheat crops. Talk is that Argentina is being downgraded. Chicago wheat futures actually gapped about a quarter of a buck higher from July 7 to July 9. September Chicago wheat was up an additional nickel July 14, trading at $5.30. We were just at $4.71 June 26.

Weather markets are fickle. Change the forecast, and the mood changes with it. Change the forecast and start thinking about USDA corn planting numbers again, and we could be back to the races.

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