From too wet, to too dry, weather takes control of market direction

Market improvements and weather impacts were main subjects of the conversation during the Agweek Market Wrap on Friday, May 26, with Randy Koenen of the Red River Farm Network and Randy Martinson of Martinson Ag Risk Management.

After a rough start to the week , grains pulled ahead to end the week better, according to Koenen.

Martinson agreed that it was a volatile week and shared that corn and wheat in particular had stronger weeks.

“July corn traded higher every session this week and posted some pretty good gains towards the end of the week,” Martinson said. “I think a lot of it is coming from weather forecasts and concerns about the old crop supplies.”

Weather was at top of mind for the two, as it is for producers right now. Just weeks ago, the concern was being able to get into the fields to plant after record snow left vast amounts of moisture . Now the concern is the heat causing dry weather that wicks up all the moisture in its path.

Martinson said this dry weather is not just hitting much of the northern Plains, it’s reaching down into much of the Corn Belt.

“And the Drought Monitor is showing expanding drought in that area as well,” Martinson said.

Contributed by U.S. Drought Monitor

Koenen noted that Omaha, Nebraska, has only seen a quarter inch of rain for May, where they normally would have 3 to 3.5 inches of rain.

“Sure, this heat will blow up some rain, we’ll get some rain, some thunderstorms someplace, but they’re going to be hit and miss showers,” Martinson said.

Thursday, May 25, was the last planting date for full crop insurance coverage for most of North Dakota corn, Martinson said. North Dakota was at 32% of corn planted as of Sunday, May 21 or about 2.5 million acres left to plant, according to Martinson.

“It’s very likely we’re not going to get all the corn planted up here in the northern Plains,” Martinson said.

Producers can continue to plant past that date, which they did last year with good yield results. The risk is that they lose a percentage of the coverage every day beyond that date if they end up making a claim on the crop. The risk of fall frost damage to crop yield and quality is greater with each day planting is delayed.

Koenen asked if producers are better off not planting past that date. Martinson said it’s better off planting because it's better for the soil to get a crop in the ground. But from an economic standpoint, it’s a fine line deciding what might be a better choice for each farmer.

Wheat took the lead this week. That boost came from less seed getting in the ground in the U.S. and abandonment in the southern Plains.

“You know, it’s not a good crop down in that Oklahoma, Texas, Kansas area. You know, Kansas is seeing some of the worst drought in years,” Martinson said. Some of those producers are now considering a second crop planting.

The heat in the Corn Belt is providing a boost to emergence for those who got seed in the ground. But if it continues without moisture, stress could come soon.

“They are a little concerned that the dry conditions are going to impact them,” Martinson said.

Lean hogs continue to hit contract lows, while cattle found new all-time contract highs.

“I think this is going to be a very important week for cattle as we’re looking at the beginning of the barbecue season,” Martinson said. “Really if this market is going to hold its strength and continue to push stronger it’s going to take a vote by the consumer to pick beef over pork or poultry.”

Koenen noted that rains in western Nebraska are leading cattle producers to start to retain some of their cattle on those improved pastures. That could be a boost to building cattle numbers.

As for the hogs, it’s difficult to know where the bottom of the market is, Koenen said. Martinson agreed that it’s going to take a big increase in demand to turn things around.

“Eventually low prices is a cure for low prices as high prices is a cure for high prices,” Koenen said. Martinson said the missing caveat for hogs is that China is not importing as much of the U.S. pork. It will take improved economic conditions in China to increase those U.S. exports.

As the markets look to have a long weekend, due to Memorial Day on Monday, Martinson said all eyes are on weather conditions. Significant rain or more heat can have a big impact on the direction this market takes next.

(The Agweek Market Wrap is sponsored by Gateway Building Systems.)