On the crop side right now, it’s all about weather. The South’s soggy conditions have farmers sitting on the sidelines for now, and USDA reports some south Texas farmers already have finished planting—but NOT all they had intended. The saturated conditions extend up the Ohio River valley into Kentucky and parts of the southern Corn Belt, and forecasts call for 8”-10” of rain in the near term, “almost hurricane levels,” notes Jerry Gulke, president of The Gulke Group.
“Some corn is under water and producers will be deciding whether to replant, or take the insurance and plant soybeans or possibly even not plant at all,” he says. “We are facing the last thing I would have thought most years—losing acres in the South. Usually the concern is in the north, such as last year when North Dakota and part of Minnesota had pretty big prevented plantings.”
Gulke adds that during a recent meeting in New York, where he spoke to a large group of fund managers and input suppliers, the general attitude was quite bearish. He notes that seed and fertilizer purveyors did little in terms of reducing prices this year, despite corn prices being almost halved. “There will be a lot of surplus carried over into 2016,” he thinks. “From what I heard in New York, I gathered we can expect a 15%-20% drop next year, especially if farmers just say ‘no’ this year. I, for one, haven’t bought anything yet, though I will buy what I need fairly soon now.”
The livestock market was the most volatile in the past week, Gulke comments. “After months of hearing about how cattle are priced too high relative to hogs, maybe we are finally looking at that spread narrowing. Traders are looking to June and thinking the retailers will have some pretty cheap hogs to feature for grilling and maybe we’ll finally see that hurt the beef market.”
It is no wonder fund managers are feeling unhappy about agriculture. Last week all ag commodities but one or two finished down for the week. This week corn and the soybean complex were up, as were feeder cattle, but the remainder were down for the week. Perhaps the weather will help crops and lead to some of the volatility often seen on a Monday.