Winter wheat futures dropped nine percent last week, largely in anticipation of a late week storm that promised to relieve the dry trend in Kansas, Colorado, Texas and Oklahoma.
For the most part, the storm delivered on the promise, dumping snow and rain that will carry the crop for a while. More moisture could fall this week.
Only western Texas, which had been the driest part of the region, missed significant moisture. Damage to the crop there might be permanent.
Cold that accompanied the storm might also have caused damage.
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The yield estimates for wheat and soybeans were neutral to bullish, but these were largely a sideshow when compared with corn.
The heaviest snow and rain fell in the eastern part of the wheat region, which already had better moisture. Western regions, which were drier, received less snow and will need regular rain to maintain crops.
The improving situation in the south more than offset worries farther north, in North Dakota and Minnesota, that it will be too wet this spring to seed all the wheat that farmers planned.
Analysts speculate that 500,000 to one million acres of spring wheat won’t be seeded.
The region is also expecting more snow and rain this week, threatening the swollen Red River, which is close to spilling over its dikes.
If the soil does not dry until June, farmers will likely plant soybeans instead. However, in the overall scheme, that is a fairly small area.
Generally, conditions now are conducive to good wheat production around the world.
The next potential worry is development of a scenario similar to last year when wet, cool weather delayed corn seeding in the American Midwest. It is wet there now and more moisture is expected this week, but it is too early yet to be a factor and if it turns out to be a normal spring, the region will be set up with good soil moisture for an excellent start to crop growth.
By the time you read this, you’ll have a better idea of how many corn and soybean acres U.S. farmers plan to seed. The U.S. Department of Agriculture was set to release its planting intentions report March 31, the day after our deadline.
Most observers expected to see less corn and more soybeans. We’ll report the USDA data on our website.
Outside markets are also affecting agricultural commodity prices. Last week, I commented on increasing optimism among investors that had pushed equities, oil and agricultural commodity prices higher.
Early this week, investors were down and appeared to be thinking that although the U.S. is getting a handle on its banking crisis and the worst of the economic malaise might be over, there are still lots of problems, such as how to restructure the ailing auto industry.
There is also little evidence of reviving oil demand, pressuring its price to drop to less than $50 US per barrel after moving close to $54 last week.
Markets will likely bounce between optimism and pessimism for the next several months until there are signs of sustained economic improvement.
Barbara Duckworth on page 6 reports that Canadian analysts are waiting for Statistics Canada data to determine how the recession is affecting meat demand.
Glenn Grimes, agricultural economist at the University of Missouri, maintains a demand index for livestock and meat, and his latest report shows that U.S. demand (which is a measurement of price and consumption) for beef and pork is up over last year at the same time.
However, demand for cattle and hogs are down. Pork demand is up 1.6 percent and beef demand is up 3.4 percent.
It is good news that people are still willing to shell out their precious dollars for meat. However, the market in which the primary producer operates, the livestock market, is not as strong, likely because of weaker exports. Last year at this time, U.S. meat exports were soaring, reinforcing demand for livestock.
