Bull markets

By Ray Grabanski
Special to the Farm Forum

03/06/18 — Bull Markets have emerged in all three grains, with winter wheat, corn, and soybeans all having a nice rally since January. The best part about the rally is it has come at a time when many least expected it, as fundamental analysis continued to indicate that prices would stay low (and even perhaps go lower) as USDA continued to tweak the carryout numbers higher in wheat and soybeans.

But rally we did, as 2017 was old news now as we already traded prices lower for 6 months on the good 2017 crops. Now, prices were reacting to the new developments that included the deterioration of the U.S. HRW wheat crop as well as the Argentine 2018 crops. So prices of winter wheat, corn, and soybeans are now near or at their highest price levels since August (for wheat and corn) and highest prices for soybeans since Jan. 2016!

The soybean rally is the most intriguing, as soybeans rallied to prices higher than all of last year, when carryout in the U.S. was projected at only 300 mb, and now we have carryout projections at 530 mb. The last few months, as USDA was cutting exports 60 to 65 mb each month, soybean prices continued to rise as carryout projections also rose. It’s not very often that happens, but happen it did this winter. One farmer joked that he couldn’t wait for another bearish USDA soybean report so prices could go up again!

But the real story this winter has been the emergence of crop problems in various areas. HRW wheat producers continue to suffer from adverse weather, as relatively warm and dry weather continues to deteriorate winter wheat conditions there this winter. Now, as March unfolds we are at a most critical point in the crops development as March and April usually make or break the winter wheat crop. Rains must arrive soon, or the winter wheat crop will suffer irreversible damage as this is the time of year that winter wheat gets a good deal of its moisture and best growing season weather typically. But currently, the warm/dry weather is forecast to continue through the next few weeks, with the pattern locked in for warm/dry weather.

That is similar to Argentina forecasts, with the warm/dry weather that began in late 2017 continuing to plague the Argentine crop. Recently, there was a suggestion that the well established pattern would soon end, but now we are slipping back toward the same warm/dry forecast again in that region as well.

US weather forecasts today slipped back to a warm/dry forecast for the HRW wheat area and southwest U.S. Temps the next 14 days have turned back to above normal for that region, with precip pushing back towards below normal as well. Most of the rest of the Corn Belt is calling for near normal precip for the next 7 days, and normal to mostly below normal for the 8-14 day forecast. So this is slightly friendly for the wheat prices, as the rally pretty much continues.

South American weather forecasts are also falling back to what it has been for most of the winter, mostly below normal precip for Argentina the next 14 days, and above normal for Brazil. Temps also are sliding back towards above normal for Argentina, and below normal for Brazil. This is once again a friendly forecast for South America, and probably explains why soybean prices pushed back to near the yearly highs again yesterday.

As the weather patterns in these two critical areas continue to struggle, prices continue to rally on the futures markets. However, while HRW production areas and Argentina continue to suffer, we have noticed a subtle change in HRS wheat weather, the other major U.S. area at risk for the 2018 crop. Recall that HRS regions in the west experienced a significant drought in 2017 that pushed wheat prices sharply higher last summer. Most of HRS country continued quite dry this fall and winter, but in early March received the best moisture of the winter with a rain and snow event. So HRS regions this week have received its best moisture of the winter with a rain and snow filled event that helped to heal up soil moisture shortages.

Not all is completely healed in the far western region, but the change in the pattern to bring this moisture at this critical time is a development in the right direction.

So opportunities are once again presenting themselves, with soybeans currently probably the best selling opportunity. But at least now with the recent price improvement, wheat and corn have hope as well, and we just might get an opportunity to sell them at a decent price as well.

Note that 2018 insurance prices for corn were equal to last year ($3.96), and soybeans only pennies below last year at $10.16 (just 3c less than 2017). HRS wheat prices were still higher than 2017, but that was due to the drought in 2017 that pushed prices higher last summer.

Ray Grabanski can be reached at [email protected]