Weather pattern changes?
06/20/17 — The past few weeks have seen weather that was much warmer in temperatures than normal across the Corn Belt and Northern Plains, with rainfall amounts also less than normal. That had the market concerned about drought spreading from the western HRS wheat belt into the Corn Belt, and markets were rallying as a result (with HRS wheat leading the rally). However, in the past week some rainfall did come in the Corn Belt and Northern Plains, and soil moisture levels and crop conditions remained about steady after falling significantly in recent weeks. That has the market wondering what is coming next: Will we return to a dry weather pattern? Or will more normal weather lead to an improvement in crop yield potential?
There is very little rain falling in the U.S. today 6/20, just some scattered showers in Minnesota-Wisconsin border and the far southeast U.S. The 7-day forecast has temps now below normal for most of the U.S. and Corn Belt, with precip forecasts wet in the southeast and eastern Corn Belt, and dry in the northwest and much of the western Corn Belt.
The 8-14 day forecast has temps normal to below normal in most of the Corn Belt. The central Corn Belt is forecast to have above normal precip in the important states of Iowa, Illinois, Indiana, Ohio, Missouri with normal precip for Kentucky and Tennessee. The rest of the Corn Belt will see mostly normal precip, with the far west seeing some below normal precip. This is not a particularly threatening forecast over the next 2 weeks.
The crop conditions and progress report yesterday afternoon 6/20 was supportive to HRS wheat as conditions declined another 4% to 41% rated G/E, down significantly now from last year’s 76% rating. This in spite of rains last week that caused many grain traders to expect an improvement in conditions. Barley conditions also declined 8% to 64% rated G/E, down from 77% last year. That supported HRS wheat overnight, with 12c gains after starting even higher.
Corn conditions were unchanged at 67% rated G/E, down from 75% last year. The Pro Ag yield model was fractionally lower at 164.5 bu/acre, down 0.02 bu/acre from last week and compared to USDA’s 170.7 estimate. Corn emergence is 98%, equal to average. Soybean conditions improved 1% to 67% rated G/E, and are now 96% planted, 3% ahead of average, with 89% emerged, 5% ahead of average. The Pro Ag soybean yield model is at 46.4 bu/acre, well below USDA’s 48 bu forecast.
Winter wheat conditions were rated 49% G/E, down 1% from last week and compared to 61% last year. The Pro Ag yield model for winter wheat was fractionally higher at 50.04 bu/acre, slightly above USDA’s 48.8 bu/acre estimate in June.
Cotton is 94% planted, 2% behind the normal 96% planted, while conditions declined 5% to 61% rated G/E, still up from last year’s 53% rating. HRS wheat is 15% headed, 2% behind the normal 17% headed at this time. Sunflowers are 93% planted, ahead of the average pace of 77% by 16%. Sorghum is 86% planted, 1% ahead of average, with 17% headed, 1% behind the average pace. Sorghum conditions declined 1% to 66% G/E, down from last year’s excellent 70% rating. Winter wheat is 28% harvested, up 3% from the average pace. Oats are 60% headed, equal to average while ratings dropped 1% to 66% rated G/E, down from 70% last year. For most of these crops, it looks like about average conditions, meaning 2017 could be an average crop (not a bumper crop but not a crop failure, either).
Moisture conditions improved 3% in topsoil rated adequate/surplus to 72%, still 2% below last year’s 74% rating. Subsoil moisture declined 1% to 77% rated adequate/surplus, still 1% behind last year. It was good to see soil moisture ratings rebound after some of last week’s rains, and helps to provide an improved cushion against drought. More importantly, it reverses the significant moisture level declines from the previous week, when drought was threatening the crop by locking it that weather pattern for a longer period of time (and traders were concerned with this).
Overall, this week’s crop conditions report provided little additional input into the major crops (except HRS wheat, which was bullish). Weather for now doesn’t look threatening, either, so we could see more sideways type trade in corn, soybeans, and winter wheat’s (but HRS wheat is chugging higher). So the weather seems neither bullish nor bearish right now, but just about average. There is an old saying, though, in the trade, that if you aren’t sure if the weather is bullish or bearish, then it’s bearish (because that means crops are not threatened anywhere with clearly adverse weather)!