Temperatures may be hot now, but there’s already chatter about the potential of frosty conditions moving the market this year.
Now that the 2013 corn and soybean crops are in in the ground, the market has shifted from the focus of late planting to what weather conditions will weigh on these crops until harvest time.
Doug Houghton, an analyst with Brock Associates, says weather patterns, USDA’s weekly crop condition ratings, as well as other crop data are some of factors that his group takes into account in making marketing decisions.
But, he cautions that any of those factors, when singled out, shouldn’t be used to make major decision. "Crop condition ratings, taken as a factor by themselves, often offer more entertainment value than true insight into production value," he says. "This is especially true for soybeans, as soybean condition ratings appear to have little correlation to final yields."
He says last year is a good example. "The stabilization and limited improvement in soybean conditions late in the growing season pointed to the possibility USDA was underestimating the crop, but it would have been hard to anticipate the repeated upward revisions in production."
For corn, he says condition ratings have a stronger correlation to yields, but are still not all that reliable.
Because many corn and soybean fields were planted so late this year, Houghton says frost and freeze concerns will definitely play a role in the market this fall.
"Corn and soybean fields in the northern Midwest are far enough behind that some could suffer significant damage from a normally-timed freeze," he says. "A high percentage of the soybean crop –- 10% -- was also planned to be double-cropped this year. Many double-crop acres in the southern Midwest will go in late due to a late soft red winter wheat harvest, so they will also be vulnerable."
If a late freeze is experienced this fall, he says maximum corn and soybean yields could come to fruition. But, there’s a lot of time between now and then for the market to speculate.
"We are almost certain to see plenty of market chatter about frost impacts but, historically, that’s a short-term market mover, not a long-term trend maker."
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