Alex Norton / Beeson Inc
It is tough to parse out just what all the rain means in a macro sense. Clearly, flooding and storms have caused billions of dollars in damage across much of the Midwest. And a return of storms likely will see more flooding and issues. The impact to individuals and communities is very real and is not to be overlooked. But from a market perspective, it does not appear to be having the same impact.
Weather, spring planting plans, trade negotiations, and more are getting headlines after months focused primarily on the U.S. and China trade drama. Look for the U.S. Department of Agriculture reports at the end of the month to shape expectations into the spring. Meanwhile, much of the U.S. is too wet with planting just around the corner. Wheat
Winter is coming to a close (despite this week's storms across much of the U.S. suggesting otherwise) and markets are getting into supply-side questions as the market drivers. The biggest questions revolve around plantings...how many acres will be planted to each of the major crops. This is always a question, but given the huge variety of trade issues across the commodity landscape, oversupply of many crops, and generally tough economic and finance conditions for many producers, the market is very unclear on expectations for spring planting. Wheat
Wheat markets are under pressure. The Chicago and Kansas City contracts are hitting new lows this week. The July hard red winter contract is down 16 percent since the start of February. Minneapolis futures contracts have been hovering at old lows, finally breaking through late in the week. With all this pressure in the wheat markets, it is tough to be optimistic heading into the spring. Most of the time when prices start March lower, the markets tend to continue lower into April and May.
For the past three weeks, the market has been soaking in the glory of a functioning U.S. Department of Agriculture. For many producers across the U.S., one of the biggest things was the ability to apply for aid as a result of the trade war's negative impact on returns. The extension to mid-February allowed for applications to be submitted beyond the initial deadline. For all market participants, the USDA's regular reporting of critical market data was particularly appreciated after over a month of silence.
The U.S. Department of Agriculture had some catching up to do after the government shutdown. There have been a slew of reports coming out over the last week after the reopening of the government allowed for data collection and report preparations. On Friday, some of the key information that the agriculture markets had been waiting for finally came out, and though the market's response was relatively muted, there is a lot of information that had to be digested in a short amount of time.
December and January are typically not very exciting for agriculture markets. Other than the release of winter wheat planted area and quarterly grain stock levels from the U.S. Department of Agriculture, winter months hold less excitement for commodity pricing.
The market likes volatility. And many consecutive years of generally good weather for most crops in the U.S. has limited that volatility (in general terms). A long-term price chart will show just how different the markets have been trading over the last few years. Nearby corn futures, for example have traded in a $1.40 range since the summer of 2014! Supplies of most crops have been comfortable which limits unpredictable, significant rallies.
Traditionally there is a lull that occurs for commodity markets in early January. Holidays have passed and until the U.S. Department of Agriculture reports on stocks, winter wheat acreage, and supply and demand estimates, there is little information for the market to find direction.
It has not been much of a holiday for markets heading into the Christmas holiday.