Is a Weather Market Now Brewing in the Grains?

Chicago is set to have its second-driest May on record. Temperatures could hit triple digits in portions of Illinois next week, and flash drought concerns are growing. By the looks of commodity prices on Friday, a weather market might now be in the picture again. 

A quick planting pace and the talk of El Nino meant traders have not been focusing on any weather issues. However, with drought continuing to expand, a U.S. weather market might be back in play, and it’s earlier than the typical fourth of July, but later than the spring weather story last year. 

Read More: Corn, Soybeans and Wheat in the Grips of Drought

Is it too early to be concerned about dryness and the impact on the U.S. crop? U.S. Farm Report analysts weighed in on this weekend’s show. 

“It is very early,” says Chip Nellinger of Blue Reef Agri-Marketing.  “I think that's why the market has been a little bit reluctant to put a big rally earlier in the week. “We have covered a few shorts in the in the corn market, we pushed up to the 20-day moving average and couldn't do much above there mid-week.”

Nellinger says things could change once the market gets past the long holiday weekend. 

“Long weekends always tend to hamper the market's ability to do much since forecasts can do a 180 over the weekend,” says Nellinger. “But if we come back in Monday night and Tuesday morning, and we still see a forecast that takes us into mid-June that has no measurable rain, I think then the market starts getting a little more worried about this dry weather continuing into the last half of June.”

Read More: The U.S. Now Has a Nearly 90% Chance of Seeing El Niño This Summer

It hasn’t been smooth sailing for planting everywhere. North Dakota is now past its crop insurance cutoff date for corn, and considering just over one-third of the crop was planted as of USDA’s latest Crop Progress report, we could see an uptick in prevent plant acres. 

“With a $5.91 spraying price on crop insurance, it has a lot of people considering the Prevent Plant option because we are moving into that final plant date. And, ultimately, while there are some that are considering the route of soybeans, that still requires fields to be ready,” says Mike North of ever.ag. 

North says when you look at the numbers data, the cost of production, plus the lower commodity prices, means prevent plant is a more attractive option than it was lsat year. 

“So, as we look at the broader base of acres further north in the Corn Belt, specifically North Dakota, you might see some acres get lost,” says North.