As planting season nears a close and the bulk of the growing season begins, weather is going to be the most important market factor moving forward.
Brian Doherty of Total Farm Marketing said that despite the quick start to planting in many areas, what happens next will drive markets going into harvest season.
“What happens over the next 30 to 60 days will set the tone for either a continuation of a bull run for prices or a price slide, representing increasing supplies,” Doherty said.
He said the corn crop progress reports are showing strong planting and emergence overall this season, with both marks coming in above their 5-year averages. Conditions are also strong with corn showing higher than typical good-to-excellent ratings.
“All this data would suggest a strong start to the growing season and little reason for end users or speculators to be buyers,” Doherty said. “With a relatively dry spring and fast planting progress along with an economic incentive, it is highly likely that corn acres will be greater than (the March USDA estimate of) 91 million.”
However, weather uncertainty has come into the market. Doherty looked at dry conditions across multiple spots in the Midwest, noting that rainfall that is coming in portions of the northern and western Corn Belt has been light, allowing for little subsoil moisture.
That, combined with strong ethanol margins and continued export demand, has created room for prices to continue to rise in the corn market.
“The stage is set for a price rally,” Doherty said. “It is critical that rainfall be timely and sufficient over the next 60 days. Many farmers would argue their crop is in good shape. Still, they are just getting by.”
Dry weather continues to be a factor in Brazil’s second corn crop, adding to the demand picture and bullish tone. This year’s conditions are some of the driest in nearly 90 years according to reports, and their crop continues to be downgraded. With any weather issues in the U.S., that would greatly impact available supply, Doherty said.
“Some have argued that an increase in U.S. acres will offset the loss in Brazil,” Doherty said. “On paper this probably makes some sense, but an end user is not worried about what’s on paper. Rather, they’re concerned if availability of supply from U.S. producers will be adequate by fall.”