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Futures market traders looked at Iowa temperatures hovering around 38 C last week and largely discounted a May 12 United States Department of Agriculture report forecasting a record soybean harvest and big corn and wheat crops.
Analyst Greg Doud at consulting firm World Perspectives said grain prices will rise and fall in coming weeks based on the arrival or absence of crop-sustaining rains.
“The reality is we’ll trade this report for less than five minutes,” Doud said.
“Then we’ll go back to trading on weather.”
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That was clear from trading on May 12 and early May 15.
At the close May 12, wheat and corn prices had risen because of drought fears, indications of a rebounding export market for wheat, and the USDA’s forecast of falling world wheat stocks.
But soybeans were down slightly, with the weather unable to make up for the USDA’s forecast of a record large soybean crop and rising world oilseed stocks. On May 15, most prices were falling with forecasts of more rain in the Midwest.
Dave Reimann of Benson Quinn GMS in Winnipeg, said U.S. weather this week could be an important factor for prices for the next month.
Most of the U.S. spring crop is in the ground and good moisture now will sustain it at least until June when the hot weather arrives.
“We’ve got a crop in the ground, with some rain, a little bit of rain. It looks good and it’s hard to kill that crop right now, so I could see some of these weather premiums erode.”
Prices will strengthen if the rain fails to materialize.
At 2.955 billion bushels, the projected U.S. soybean crop would be a record high. Federal support programs make soybeans more attractive than other crops.
The USDA said season-average soybean prices for 2000-01 are projected to decline to $4-$5 (U.S.) per bushel, compared with an estimated $4.65 per bu. in 1999-2000. This would be the fourth consecutive annual price decline.
In Canada, Winnipeg Commodity Exchange canola prices sagged as traders digested the USDA news, along with reports of improved prairie soil moisture and larger canola stocks.
The USDA projected a U.S. corn crop of 247.41 million tonnes, the third largest ever. The projected price range for corn is $1.60-$2 per bu. for the new crop year, compared to $1.85-$1.95 for 1999-2000.
Wheat estimates were a mixed bag. The winter wheat crop estimate, at 44.91 million tonnes, is down three percent from 1999, but is a little larger than the 43.73 million tonnes forecast by grain traders.
This bearish news was offset by the USDA forecast that world wheat stocks at the end of 2000-2001 will be 109.44 million tonnes, down 13 percent from 1999-2000.
The projected price range is $2.40-$2.90 per bu., compared with an estimated $2.50 for 1999-2000.
The USDA said its numbers were tentative, based on the fact that the U.S. crop is still being planted. Yields are forecast based on average weather during the growing season.
But the weather is anything but normal. Recent showers have provided enough moisture to germinate a crop in the Midwest, but soil moisture reserves are dangerously low.
Last week, 87 percent of Iowa’s topsoil was rated as short to very short of moisture. That compared to one percent a year ago.
Temperatures pressed close to
38 C in parts of Iowa and Nebraska late last week. Surface water and wells are near record low levels and some communities have begun volunteer water rationing.
“We’re still falling behind on precipitation levels, and now running about 60 percent of normal,” said Al Dutcher, a climatologist at the University of Nebraska. “Higher than normal temperatures mean the dry pattern may build on itself.”
