Market volatility is a regular feature of the grain and oilseed market this growing season and according to an Ohio State agricultural economist it will remain so until at least the next USDA production reports due in mid-August.
"Since the July reports, we've been in a straightforward weather market," said Matt Roberts
, Ohio State University Extension economist and associate professor in the Department of Agricultural, Environmental and Development Economics. "We know planting progress was very slow this spring, which created a lot of concern about progress of development. Then the second and third week of July turned extremely hot across the country."
Concerns about heat- and moisture-related stress across the Corn Belt have traders as mindful as ever of Mother Nature, particularly because from a supply and demand standpoint, the markets are extremely tight.
Roberts said any major hiccup in production would likely mean higher prices for corn.
"Most of the country had adequate moisture because of the wet spring, but it turned extremely hot and humid during pollination so there was a lot of concern for the corn crop," he said. "We saw poor root structure, poor stands, and very patchy fields, especially in the Eastern Corn Belt."
With the variability of planting dates for Ohio corn, pollination has already occurred in some fields, and yet to occur in others, meaning weather will remain a factor for several weeks to come. For soybeans, August is a critical month to monitor weather-related plant stress.
"As crop conditions have continued to slowly deteriorate over the past few weeks, it's really focused a lot attention on the August reports," Roberts said. "Those reports will be the first that USDA attempts to actually forecast yield for the upcoming crop, based on a survey of over 1,000 sites across the country. Because of the tightness in the market, any shortfall in yield will be reflected by sharply higher process."
He noted that winter wheat has largely held with corn in recent weeks, while spring wheat has traded at a historical premium due to lower plantings resulting from the wet spring weather. In terms of soybeans, while the market has traded alongside corn to this point, it should move into a weather market of its own through August.
Corn traders are eagerly awaiting August 11, when USDA releases its latest World Ag Supply Demand Estimates, based on the first field survey data of the year.
"I think the market is beginning to expect that we're not going to hit that 158-bushel number," Roberts said. "If that's the case, then prices need to be at a level to ration out consumption. We do not have excess inventories, so if we don't hit 158, consumption will have to decline and prices will have to ration out the available inventory."
He recommended that farmers look at their new crop marketing plans and take advantage of opportunities where they exist. For the most part, he said old crop stores should already be sold.
"The first thing is on corn, if you can, leave basis open," Roberts advised. "I think we're going to have great basis opportunities next year just like we did this year. Basis improvements could be significant."
He also suspects the market will facilitate a "nice run-up" going into the August reports, which could present an opportunity to market some of the new crop. Given the production challenges facing Ohio farmers, however, he noted that many producers likely will wait to learn more about the crop in the field before being overly active in the marketplace.
"After those reports we'll likely see some weakness moving into harvest," Roberts said. "When we start getting harvest data in, that's when the market will start to pick a direction as we get an indication of how big the crop is, actually."
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