The weather is better, but the drought isn't dead
Mar 12, 2013
From The Editor
March 8, 2013
Hello Pro Farmer Members!
Change in the weather... change in market momentum. That was the focus of the conversation PF Sr. Market Analyst Brian Grete and I had for Pro Farmer's Profit Briefing on AgDay this week. And there has been a change in the weather... all for the better, if we're thinking about yield potential.
NOAA added to the speculation of improved growing conditions for spring 2013 with Thursday's release of the Seasonal Drought Outlook. It shows expectations of "ongoing drought, some improvement" over most of the western Corn Belt. It seems, however, that most looking at this outlook saw the "green hatches" on the map and assumed it meant "drought over."
That's not what it means... just because there's expected to be "some improvement" in western Iowa, Nebraska and parts of the northern Corn Belt in Minnesota and the Dakotas, that doesn't mean conditions will be "good." Some that call themselves "crop watchers" have turned rather smug about the outlook.
I'll summarize it this way:
We've got a long way to go before this drought is dead.
That means the 2013 corn, wheat and soybean markets will likely be filled with rally stops and starts all spring long. It will be interesting to see how the market responds to the first USDA Crop Condition Report of the spring when April gets here. It will include state-by-state winter wheat crop condition ratings and all the talk of improved conditions in the Southern Plains will undoubtedly have traders looking for crop ratings of mostly fair to good.
In reality, it depends on when that crop was planted. Early seeded wheat did get a bit of a stand established last fall and recent precip is helping the crop get established this spring. Late-seeded wheat, however, is just now trying to emerge. If stands are taken into consideration, not much of the Kansas and Oklahoma wheat crops will be able to be called either "fair" or "good."
And wheat is the first market that will show us if traders are tuned into potential crop problems... or if they've decided recent precip and change in weather patterns has fixed the drought problem.
As a reminder, it did rain last spring. Not a lot, but it did rain. And most long-term weather forecasters have been calling for normal- to below-normal precip this spring. That suggests some rain in the Midwest to at least dampen soils to get the crop started.
The other thing that most long-term weather forecasters have been calling for is below-normal rain and above-normal temps in July and August. That ought to be just enough time to lull the markets into a false sense of security before yield-robbing weather once again ignites a weather scare.
Pro Farmer has not recommended any 2013-crop corn, bean or wheat sales at this time. If we had it to do over again, we'd have some sold. At current prices, the first round of downside price coverage will likely be done with hedges or put options, rather than cash sales. (Cash-only marketers will likely be advised to make small cash sales to "get something" on the books.) The hedges will provide the flexibility needed in a year like this when we know there's likely to be a weather-scare rally at some point.
If you haven't checked out My Grain Trades on your homepage yet, please do that this weekend. This is an exceptionally valuable tool that will help simplify your marketing efforts in the year ahead. Click here to go to the introductory page. It's a free service for Pro Farmer Members that helps you keep track of your grain sales and figures your profit potential on the fly. Just check it out...
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That's it for now...
After a very active seminar season, I'll be out of the office March 11-15. You'd think I'd stay home to relax, but with my son Tom off for spring break, we're heading to Texas to see my old buddy Steve Cornett. Steve is the Editor Emeritus of Farm Journal Media's Beef Today and lives south of Amarillo. If you know me (or Tom), you've probably got a good idea what we'll be doing. Let's just say the hogs, coyotes and (hopefully) the bobcats on Steve's ranch aren't going to get a moment of rest for the next few days!
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