November soybeans shot up $1 in just two days. The December corn contract skyrocketed 50 cents during the time. Drought and dryness concerns are fueling the grain markets and grain analysts remind farmers supply-driven rallies are meant to be sold.
“This is definitely a bonafide weather market,” says Garrett Toay of AgTrader Talk. “Midweek we started to get into some long term trend lines that we’ve pushed through. And now I think you’re going to see some either full hearted fund buying coming in here, or the rest of the shorts are going to be covering.”
Weather had been sending markets gradually higher the past couple weeks, but on Thursday, big market moves took place. That same day, the U.S. Drought Monitor showed dryness and drought expansion across western Iowa, Illinois and Indiana. •
The U.S. Drought Mitigation Center shows 57% of the U.S. corn crop is now covered in drought, with 51% of soybeans also experiencing drought. That compares to last week when 45% of corn and 39% of soybeans were covered in drought.
Sam Hudson of Cornbelt Marketing doesn’t think the Drought Monitor was much of a market mover. Instead, traders continue to watch the forecasts.
“We already know it’s dry,” says Hudson. “I think that’s part of it is timing. You have a three-day weekend, and we’ve stretched these two week forecasts three or four different times now, it seems like, and at this point, we’ve come to a point where if rain doesn’t happen, you’re going to have some irreparable damage on some of these crops.”
Hudson says it’s not just that the U.S. is dry, it’s where the dryness is continuing to expand.
“Everyone wants to talk about 2012 in comparison to this and that, but just look at it objectively, between Indianapolis and even to Des Moines, some of those areas are the highest producing counties that we have in the country. And if you continue to stretch that dry forecast out beyond July 4, it becomes a real problem in terms of trying to nail down where production is,” adds Hudson.
Is this a repeat of 2012? There are some stark differences, but there are also a few similarities, according to Toay.
“I think if you look at the percentage of the Corn Belt, that is in this 30-day dryness is pushing 80%. That’s comparative to late July 2012,” says Toay. “As it stands right now, you’re looking at the fourth driest June since 1960. And the second driest April to June time period since 1960s, but you also have some comparisons to 1988 there as well.”
Another difference is how cool the temperatures have been for areas of the Corn Belt. With El Nino entering the picture, there are expectations for more chances of moisture in 2023.
“I think the fact of the matter is that we’ve never really seen anything like this,” says Toay. “There’s some comparing this to 2012, there’s some comparing to the 1988, but this is 2023. And I’m my worst fear is that if it’s not a drought, we come in off of a three-day weekend, like this weekend or Fourth of July weekend, and all of a sudden we’ve got rains across the Corn Belt, and this thing just falls apart considering the demand prospects.”
USDA’s next chance to give an updated look at the dreary demand picture will be t the end of the month. USDA the June Grain Stocks Report, as well as an updated look at planted acres.
What will the traders be watching closest? Hudson thinks they’ll be watching both.
“I don’t know that you can make a huge argument on the acreage side of things, and there was a lot of concern, including with myself, back in March when you had all that snowpack in the Dakotas in terms of wondering if we were going to get in and plant,” says Hudson. “Then, they finally did get in, and since then, they haven’t seen any rain either.”
Hudson says he doesn’t expect any major fireworks in the acreage report, unless there’s an adjustment to harvested acres toward the end of the year.
“As for the stocks report, I’m not a huge believer USDA stocks are as large as what they say they are,” says Hudson. “I think that’s part of the problem in our export program. We just don’t have a lot available to ship out here and the only time we ever really see them pull that curtain back is when we get into a production problem. So, you could see some fireworks there. Could it be a huge amount? No. But like Garrett said, it could add a little bit of fuel to the fire here if we’re still dry, especially as you go into that Fourth of July holiday.”
