“Widespread rainfall is expected (in Brazil) during the six- to 10-day period, which will further boost soil moisture in northern areas and also lead to improvements across central areas, favouring corn and soybean growth.”
“Kent Beadle with CHS Hedging said corn and soybean
futures have been slow to react as the weather delivers blow after blow over
much of the Midwest.”
Brownfield, Oct. 17, 2019
What it means:
If correct, then corn and soybean futures may have more
upside ahead. But the difficulty with situations like this is knowing when or
if the premium is fully in the market.
Admittedly, the U.S. corn and soybean crops have faced a
bevy of challenges this year. Right off the start, planting was delayed by
overly wet spring conditions that meant some crops didn’t get into the ground
until late June or even early July. After that, parts of the Corn Belt turned
too dry. And with crop development still lagging well behind normal, many areas
got a killing freeze earlier this month. On top of that, wet and snowy weather
has battered some regions, most notably the more northern production states of
North Dakota, Minnesota and Wisconsin.
Corn futures have certainly moved higher from early
September, but the market so far remains well below where it was in the spring
and early summer amid all the angst about late planting. Soy futures have also
moved higher and are actually back near the spring highs, but you have to
remember also that this year’s U.S. crop is already expected down about 20%
from a year earlier. In contrast, American corn production is only expected to
fall about 4%.
Yes, some harvest losses are likely. But a true picture
of final crop quality and how big those losses might be is not likely to emerge
until the harvest progresses further, or is even finished. As of Sunday, less
than one-third of the corn crop and less than half of the soybean crop was in
The USDA did some modest tightening of the 2019-20 U.S. soybean
supply-demand sheet earlier this month, but so far has stubbornly held onto the
idea of a relatively large corn crop, regardless of the weather and all the
other obstacles the crop has faced this year.
Some traders and analysts may beg to differ, but at this
point, the market still isn’t convinced there’s a disaster in the making for
either corn or soybeans. As most old timers know, good crops seldom end up
being as big as expected – just as poor-looking crops seldom end up being as
bad as expected.
It’s an old axiom that markets seem to reflect as well.
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