Prices go down as the weather improves

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Planting season at Putt Farms.
(Farm and Dairy file photo)

Last week, while Squeeze and I vacationed in Italy, corn prices on the Chicago futures markets made contract highs. As soon as I came back, prices declined.

Maybe there is a connection to the two events. Perhaps the readers should all take up a collection to send me back over there, at least to get the markets through the planting season. An investment of the cost of a few kernels of today’s corn seed from each of you would send me there for months!

The day I left home, Monday, April 23, corn futures made their lows. Soybeans followed with lows the next day. Then, we rallied both commodities.

The first day I was home, May 3, corn futures started a correction lower. My first real vacation in 25 years, and it shows up on the grain charts! July corn futures touched 3.851⁄4 April 23, then rallied to 4.081⁄4 on May 3.

We are currently trading 4.02 as I write this Tuesday morning. We gained 23 cents before the break. December futures behaved in a similar fashion, with a low April 23 at 4.02-1⁄4, then a 20-cent gain to 4.22-1⁄4.

We are currently trading 4.17-3⁄4, a nickel off the high. July soybean futures behaved differently. Yes, there were gains, but we got nowhere near the contract high, and traded lower quickly. The July low was at 10.27-3⁄4 on April 24.

Up and down

The high was 10.67-1⁄2 on the 30th. We are currently trading 10.27-3⁄4 after a dip to 10.10-3⁄4 yesterday (Monday the 7th). So, we lost 57 cents from the recent high, and got nowhere near the 10.90-1⁄4 high made on March 2nd.

November soybean futures followed a similar pattern. We made a low of 10.25 on the 24th, then a high of 10.57-3⁄4 on the 30th. We are currently trading 10.25, up seven cents after a 10.16-3⁄4 low Monday.

In my mind we are now trading planting progress. With the delayed planting that we saw in April, both corn and beans rallied. Then, soybeans weakened with the realization that delayed corn planting could add to soybean acres.

Once the corn started into the ground, corn prices moderated and soybeans rallied slightly. In fact, a look at Monday’s USDA Planting Progress Report may confirm that. Planted acres are now shown as more than the trade expected.

Ahead of average. For the U.S., 39 percent of the corn is planted, compared to a 44 percent average. The trade was expecting 35 to 37 percent. The soybean planting reported by USDA is not only more than trade expectations, but ahead of the average.

We are now 15 percent planted, but 13 percent is our five-year average. Traders thought 11 to 13 percent was planted. The Ohio planting numbers are similar. We are at 23 percent on corn, with 22 percent of that planted in a week.

Last year at this time we had 45 percent planted, but our average lags behind the nation, at 27 percent for this date. The Ohio soybeans show eight percent planted, up from a token one percent the week before.

Last year we were at 16 percent, and the average is just nine percent at this time. There are other fundamental reasons for price changes recently. Corn prices were helped by the report that Brazil’s second crop corn, the “safrinha” crop, is being hurt by dry weather after seeing acres limited by weather problems during planting.

Brazilian crop

Already the projection is for a crop reduced by 2.7 mmt to 57.2 mmt. The Brazilian estimate is now 83.9 mmt, but USDA still shows them at 92 mmt. I have been dubious with the results of the USDA Planting Intentions Report, out at the end of March.

We had expected a million acres more soybeans, but got a million less. Delayed planting played into the scenario that the soybean acres would not decrease. Now, we have caught up the planting and have two seeks of good forecast weather.

The USDA may end up correct, and the corn may get planted without impacting bean acres. The quick boost in planting not only proves the improvements in iron and technology that have changed the farm scene, but it is aided by the current weather forecasts.

They are calling for above normal temperatures and below normal precipitation. This could mean a complete reversal from the discouraging weather prospects of the last half of April. The recent run-up in corn prices, if it came on fears of planting being denied on some ground, should be respected and rewarded.

There is a tendency in ag country to keep planting corn as long as the weather is good. If indeed the projected acres are planted, there is the possibility that we plant even more than projected. The best price for the year could have just come and gone.

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Marlin Clark is an associate of Russell Consulting Group, with a local office in Williamsfield, Ohio. Comments are welcome at 440-363-1803.

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