Melvin Brees
Farm Management Specialist
University of Missouri Extension

 

 

 

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Please send your comments and send suggestions to Melvin Brees, Farm Management Specialist, University of Missouri Extension, #1 Courthouse Square,  Fayette, MO 65248, call 660-248-2272, or send messages by e-mail to: breesm@missouri.edu.
June 8, 2001

Weather Confusion

Large supply and the potential for large corn and soybean carryovers for the 2001 crops have dominated the markets for some time. However, demand is also at record levels and any weather related production problems could tighten supplies quickly. Weather is beginning to become a more important factor in the grain markets.

Crop problems usually occur under drought conditions. While producers understand the problems associated with wet conditions (late planting, crop diseases, drowned out crops, poor stands, slow growth, flooding, etc.), the markets are usually slow to recognize them and in general believe that “rain makes grain.” The Northwestern Corn Belt has been wet all spring, but planting delays there were offset by rapid progress in the Eastern Corn Belt. Last week’s USDA reported planting progress, while behind last year, is ahead of the five-year average. However, as dry conditions continued in the East (especially Southern Illinois and Indiana), the markets began to show signs of a price bottom and the possibility of a drought rally. Now rain has fallen in many of these dry areas.

Remember 1993? As the wet conditions continue in the Northwestern Corn Belt (now including most of Central and North Missouri), at least one market analyst suggests the situation is similar to 1993 (although not as severe) when total production was reduced by wet conditions and flooding. The soggy fields, flooding of creeks and flooding on the Missouri River supports this comparison. The soggy field conditions means that sizeable acres will be planted or re-planted late. This suggests declining yield potential and even greater risk of early frost damage in the fall.

Crop conditions are reflecting the weather extremes and also beginning to get attention. For example, while last week’s percentage of soybeans planted lags the same week of 2000 by only 9% (80% vs. 89%), the percent emerged is 19% behind last year (59% vs. 78%). In addition, both corn and soybean crop condition ratings have slipped in recent weeks due to the too-wet or too-dry conditions.

It makes for confusing market reactions to weather forecasts. Rain makes grain, but warm and/or dry weather forecasts that offer relief to wet areas stall out price rallies. In contrast, rain in the forecast helps dry areas and stalls out price rallies. Wet or dry, either one can be positive or negative. Confusing—isn’t it!

The problem for most of us is that the confusing weather situation just adds to our production and price risk. For crops that aren’t planted or need to be re-planted, there is an increasing risk of reduced production—maybe no production in some very wet or flooded fields. The planting delays also drags out the yield uncertainty until frost risk is past in the fall. While it still might not occur, this sets us up for the double hit of low prices along with fewer bushels to sell and LDP. Managing these risks starts with reviewing our financial position and cash flow projections along with beginning to prepare for possible adjustments in business plans and marketing strategies. --Melvin

 


University of Missouri ExtensionDecisive Marketing - June 8, 2001
http://outreach.missouri.edu/agconnection/DCT/DM010608.html -- Revised: April 20, 2004
breesm@missouri.edu