Farm Futures - Weekly Market Recap

Weekly Market Recap
Bryce Knorr, Farm Futures senior editor
March 27, 2015

USDA doesn't begin issuing nationwide Crop Progress reports until April 6. But there are already signs corn planting is off to a slow start in 2015.

Weekly updates issued by states in the South show wheels turning slowly, if at all, so far. Soaked soils and persistent rains put a crimp on early seeding.

Texas, where corn planting traditionally starts first in the U.S., saw progress only in fits and starts. Normally 37% of its corn crop is planted by the fourth week of March. This year just 14% was in the ground. Almost 50% of Louisiana's crop should be planted by now, but growers there had barely scratched any dirt yet. Planting was estimated at only 1% complete. That was better than across the river in Mississippi, where nothing was seeded, though the five-year average there is only 17%.

To be sure, these states don't control the fate of the U.S. crop by any means. All together they accounted for barely 3% of last year's record production. But farmers elsewhere are understandably nervous. Early corn planting progress was slower than average in five of the last seven years nationwide.

A slow start doesn't doom a crop – witness last year's record, which shows the importance of cool weather and timely moisture. But timely planting is one ingredient of success for most growers.

Forecasts show better hopes for a fast start this spring in the western Corn Belt, where above average temperatures are forecast through the first week of April. Below average temperatures could continue across the northern tier of states into the eastern Midwest, where they could persist through April, according to 30-day forecasts out recently. More rain is also in the outlook into early April, at least.

These weather concerns are on reason why the first part of spring tends to be a good time for making sales of new crop corn. While the crop eventually gets planted, until it does some risk premium can work into the market.

Corn prices tried to break out higher on price charts ahead of March 31 reports on acreage and grain stocks. But volatile outside markets again spilled over to derail the rally.

Good demand and acreage cuts around the world should support potential for growing season rallies, unless the government uncorks some very unpleasant surprises at the end of March. But global bearishness in commodities could deflate prospects, too. Lower crude oil prices, for example, make ethanol less competitive. And a weaker crude market could make money managers think twice about taking positions in grains.

While waiting for these currents to play out, don't forget about old crop. Basis continues to strengthen as farmers hold tight, providing opportunities for basis contracting. Spotting those contracts and moving grain when others are busy can keep inventories under control. A flood of grain onto the cash market this summer could overwhelm prices if growing season weather again is favorable.

Soybeans continue to have trouble sustaining rallies, thanks to huge global supplies that could remain burdensome in the year ahead. Nonetheless, U.S. export sales stayed surprisingly strong at the end of March, despite the flow of new crop production from South America onto world markets.

Traders widely expect farmers to increase soybean seedings this spring, and Farm Futures projects acreage at 87.3 million. The only real question from the March 31 reports may be whether updated grain stocks data adds fuel to concerns the 2014 crop was smaller than previous estimates. However, drawing firm conclusions from these quarterly stocks reports can be very difficult.

Growers hoping to sell rallies during the growing season will need patience, and maybe deep pockets. Rallies in soybeans tend to happen in the second half of the growing season. Prices could be sharply lower by then, however.

Wheat prices were derailed again by the problem that's dogged the market all year –poor exports. When a weaker dollar didn't spur a rebound in business, traders sold the market aggressively.

Wetter forecasts for dry areas of the hard red winter wheat belt also kept buyers sidelined, and weekly crop ratings from key states showed little deterioration in conditions overall. While parts of Kansas remained stressed, Texas is doing better, thanks to more rainfall in eastern parts of the state.

Production prospects also picked up in Ukraine and Russia, after a tough start for winter wheat there. Still uncertain is how much grain governments will export, as an uneasy truce prevails.

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