Five, ten and fifteen day weather forecasts are all the rage these days as mathematical models built by market players (hedge funds and commercials) start to calculate the effects of rain, soil temperatures, and any other data point that you can think of.
Some cooler, wetter weather is being forecasted for the American Midwest this week, which could slow down the most impatient of farmers who are already trying to get into the field with their seeders. That being said, if too much rain hits the major growing regions and impedes field work, prices on the futures board will increase. The reality is, with technology in drills these days, up to 40% of the U.S. soybean and corn crop can be planted in one week. Thus, the rumour of “the crop won’t get in on time” should be considered an opportunity to make sales, and not an indication of the trend.
Also worth consideration is that not much on the demand side can dramatically shift the markets before the end of the current marketing year. One supply-side factor could come from later this month when the Russian government is expected to announce whether or not they’ll continue to tax wheat exports after July 1st to start the new marketing year. SovEcon says that an extension of the tax program is unlikely thanks to slowing inflation and crops looking good in the southern Russian regions.
On that note, the USDA put out its first country-wide crop ratings report on Monday, April 6, showing that winter wheat conditions are doing better than a year ago with 44% of the entire American crop rated in good-to-excellent health, versus the 35% last year at this time. In the midwest where soft red winter wheat is predominantly grown, conditions are seen as pretty favourable thanks to good moisture profiles. Conversely, drier conditions in the southern plains continue to raise yield concerns.
Some analysts are suggesting that if corn seeding is delayed by cooler/wetter weather in the southeastern America (planting there is delayed), farmers will switch to soybeans. That being said, whatever corn acres lost in the Mississippi Delta will likely get made up by the midwest and northern plains thanks to this early spring that we’ve had this year in North America.
Also, the USDA’s World Agricultural Supply and Demands Estimation report came out a few days later on Thursday, April 9, but it was mostly a yawn as U.S. ending stocks were changed a little bit thanks to subtle changes in feed and exports but the market viewed the report as erroneous. U.S. soybean endings stocks came in exactly at the 370 million bushels that the trade was forecasting thanks to increased seed and residual use. Increased feed use was seen in both corn and wheat, which put U.S. corn ending stocks at 1.83 billion bushels (27 million bushels below pre-report guesses) and 684 million bushels (eight million bushels below pre-report expectations.
Internationally, the USDA increased its estimate for the Argentinian soybean crop to an even-bigger 57M tonnes while Brazil’s soybean production was left unchanged at 94.5 million tonnes. Globally, the soybean carryout for the 2014/15 marketing year was up a little bit from the March report but close to expectations at 89.55 million tonnes. World corn ending stocks came in at 188.5 million tonnes, above the 186.9 million tonnes the market was expecting and March’s number of 185.3 million tonnes. Slight increases to the wheat side of things were seen in the Former Soviet Union states and the European Union. Ultimately, the report didn’t provide any substantial directional advice to the market, so it’s back to watching for weather forecasts and whether or not geopolitical risk will rise up from its current weak state in a place like Brazil, Eastern Europe, or Asia.