The crop may not be in the ground for U.S. farmers, but it’s still a weather market.
While the past week’s trade has largely been affected by the Feb. 9 Supply and Demand report from USDA, the weather in South America still has a large role to play in the short term, according to Mike Zuzolo of Global Commodity Analytics. The corn crop in Brazil and Argentina appears to be trending lower, he said, which may make for an interesting couple of weeks.
“There’s still nervousness surrounding the weather implications on the corn crop,” Zuzolo said. “The second crop corn is almost 70% of Brazil’s crop and is planted late now. So they are going to go through some major heat if they have a typical year.
“In Argentina, February saved the crop from being a calamity, but are we really that much different than we were in 2008? The crop seems to be coming down and the market seems to be nervous.”
While South American weather remains an unknown, the U.S. weather moving into March will also play a major factor heading into planting season. Many locations finished the 2020 season on the drought monitor, Zuzolo said, and if there is enough precipitation to change the maps, it could affect some of the traders banking on dry conditions.
“It could take a lot of steam out of the La Niña bulls,” Zuzolo said. “It’s been 10-plus years since I can remember Corn Belt producers getting as much work as they got done this past fall and they are ready to go fast on planting in April. If there’s no dry weather after we get it in, I could see this market wondering why we are up at these price levels.”
In addition to the potential for a wet overall February, Zuzolo also noted the amount of planted acres in the U.S. will be a large factor for supply as the market attempts to build back demand.
“I think (traders) are really watching the return of normality coming out of COVID-19, which has been delayed,” Zuzolo said. “This calls into question, in my view, having to ask once again whether we can have a normal summer grilling season and summer driving season. If we don’t see that, I think these ‘bulls’ will have difficulty justifying their position.”