Commodity prices have been on a pretty steady climb since April, but the road still had a few bumps along the way. The latest rough patch happened Monday, June 20, when corn and soybean futures each finished the day down around 15 cents. What happened?
Paul Georgy, president/CEO of Allendale, Inc., looked at a number of factors that could be in play, including:
- A weather forecast that calls for cooler, wetter weather across the Midwest – much of which has been in need of a drink this June.
- The latest USDA crop conditions report. Corn’s good-to-excellent numbers are currently around 75%, while soybean is not far behind at 73%.
- Argentina’s corn acreage, which could spike 20% for the 2016-17 growing season.
- The upcoming Brexit vote on Thursday, June 23, which determines if the United Kingdom stays or leaves the EU. This is causing increased margin requirements for several currency and metals contracts.
Joe Vaclavik, founder and president of Standard Grain, Inc., says that of all the factors affecting grain markets right now, weather is having the single largest impact.
“Make no mistake about it – this was a shift in the weather forecasts over the weekend,” he says. “On Friday afternoon, we had been led to believe that this week was going to be very hot and dry for a big portion of the Corn Belt. Over the weekend, forecasts shifted. We’re now looking at a pretty good chunk of rain for most major corn-growing areas during the next few days.”
Alan Brugler, president of Brugler Marketing & Management, says crop conditions and yield estimates changes as quickly as the weather forecast – and these changes can be frequent.
You get pricing opportunities that sometimes turn out to be well above what the supply/demand situation ultimately dictates,” he notes. “In other situations, a fall drought like ’83 or an early freeze provide the price juice. Don’t get distracted by all the spraying and irrigation and hay baling and your kids showing animals at the county fair.”
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