This time of year commodity markets are often talked about in terms of “weather markets,” and this year is certainly no different.
“It’s about two parts of the weather,” said Ed Usset, professor emeritus and grain marketing economist with the University of Minnesota. “Did as much rain fall as they expected, or less?”
During the middle of June parts of the Corn Belt – the “I” states of Illinois, Indiana and part of Iowa – all received good amounts of rain. However, in the northern Corn Belt region, including North and South Dakota and western Minnesota, the rain was hit and miss. Total precipitation across that region is far below normal for the month of June.
According to Usset, on June 18 the market had a bounce up when it realized not as much rain fell in the recent preceding weather pattern. Then, over the following weekend (June 20), much of Minnesota and parts of northeastern North Dakota had good rains, although western North Dakota and western Minnesota didn’t do as well.
“Some places got really good rain and I think the markets are trading back depending on how much they got relative to expectations,” he said.
Usset also pointed out that traders trade the five-day outlook and according to that forecast more rain was expected.
“They’ve got more (rain) coming, not a lot, but the damaged spots in North Dakota and western Minnesota, and far western Iowa need more than they’re getting,” he said. “But the rest of the Corn Belt, I think, is doing pretty good and the market is trading there.
“(Weather is) really the bottom line on markets today and for the next three weeks,” he added.
Elsewhere in the world, China has begun switching over to South America to source soybeans as is typical for this time of year when South American producers are harvesting their soybean crop. Also, dry conditions in South America means that the corn crop there will not be as large as anticipated earlier in the growing season.
“The market has digested and accepted the idea that the Brazilian second corn crop is going to be smaller and it’s (already factored) in the market. I don’t think there are any surprises left there,” Usset said.
Looking at prices in the region, at one local elevator in west central Minnesota regularly followed in this column, as of June 21, the July cash price for soybeans was $13.40 and basis was -30 cents under. The October 2021 futures price for new crop soybeans was listed at $13.19 and basis was +6 cent over.
In the near-term, the market will continue to monitor the weather and, more specifically, the amount of rain or lack thereof across the eastern Corn Belt of Illinois, Indiana and Iowa, as well as the western Corn Belt region of the Dakotas, Minnesota and western Iowa.
Outside of the weather, Usset said the next big news for corn and soybeans is the June 30 planted acres report as that holds the potential for the next big surprise as we find out just how many acres of soybeans actually got planted.
“I think the assumption is that there will be more corn acres than assumed in March, and more soybean acres, and that could be the next big surprise either way,” he concluded.