Cool weather in April across much of the United States slowed corn planting, crop growth and could potentially have serious adverse effects on wheat production. All these factors are heating up the markets.
“It's going to be a long ride through planting and the entire growing season,” Jon Marcus, Lakefront Futures and Options, said of the market volatility. “The ranges are going to be like we haven't seen in several years now.”
Marcus, speaking at a Minneapolis Grain Exchange's press briefing on USDA's April 12 supply and demand estimates, says the extent of damage from freezing weather that hurt the wheat crop from Kansas to the Mid-South was still not known at the time of this writing. “We'll have to take a wait and see approach. We deal with weather concerns every year. But hopefully, the damage won't be too extensive.”
Marcus noted that if “there is extensive damage to enough wheat acres, there could be some switching to corn in the Midwest and prices could slide in corn and rise in wheat, which could have a significant impact on corn prices.”
USDA projected a season average farm price for corn at around $3 to $3.20 per bushel, significantly below current levels. Marcus says for that reason, “now is good time to take advantage of current prices, to get hedged. I do think we could slide down to $3 to $3.20.”
Marcus says he's not as concerned about planting delays in corn, “because we have them almost every year.” Rather, keep an eye on the weather this summer. “If we have a great growing season, I wouldn't be surprised to see corn slide below $3.”
According to the Chicago Board of Trade, the realization that corn planting has fallen behind added to a positive tone for prices in mid-April. Mid-April temperatures in the Midwest were expected to remain below normal and it may take several days of dryness to get machinery into the fields. In addition, soils are too cold for germination for much of the western Corn Belt.
USDA's crop update for the week ending April 6 showed corn at 5-7 percent planted compared with a 17-year average of 10 percent. But traders felt that with the cool and wet forecast, nearly 25 percent of the crop would be planted by the end of the month, compared to the normal 50 percent.
USDA's April 12 U.S. old crop ending stocks estimate for corn is 877 million bushels, a little higher than average trade expectations, and up from the previous month's estimate of 752 million bushels.
Soybean stocks came in at 615 million bushels, 29 million bushels higher than expectations, and up 20 million bushels from the previous month. Wheat ending stocks, at 422 million bushels, was a little lower than expected, according to Marcus.