Free Commentary

By: Dan Hueber –

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness.”  While I doubt that Charles Dickens had crop conditions and commodity markets in mind when he wrote those immortal words, they do seem appropriate to describe what we appear to be experiencing this crop season and the conditions report issued yesterday highlighted that even more.  Crop conditions for the western side of the corn/soy production areas generally declined while improving in the east but the net result was a slight reduction in overall conditions and volatile price action.

At first blush, one may wonder why prices have responded to just a 1% decline in the good/excellent rating for corn and beans as in each case, the vast majority of the crops remain in that category; corn 64% and beans 61%.  Regardless, it is the trend that is disconcerting for the bear and possibly even more telling is the comparison to the same period last year.  Twelve months ago corn was rated 76% good/excellent and 53% of the plants were silking compared with just 40% this year (average is 47%). For beans, a year ago at this date, 71% of the crop was rated good/excellent but plants blooming is right on schedule with 52% currently versus a normal 51%.  Granted, we still have a number of weeks left in this growing season for potential improvement but to have accepted and traded on the yield number issued by the USDA last week would seem to give meaning to “the age of foolishness.”

Of course we all know first-hand how weather forecasts can shift but the most recent update by the Climate Prediction Center would not appear to offer much in the way of relief for the regions most adversely effected by the hot and dry conditions this year.  The 6-10 outlook (7/23-7/27) call for above to much above normal temperatures for everyone but the Great Lakes and Northeastern regions of the nation and moisture to miss the driest areas.  To paraphrase the song, “the rain will not fall mainly on the plain.”

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I have always maintained that weather markets are the most difficult to work with due to the uncertainly of a shift in the pattern, but that does not appear to be on the horizon at this time. Of course, none of us at this point knows exactly how this will translate into a final yield but it would seem safe to say it will be something lower than had been factored into the prices last week.  We will need to remain patient a bit longer to see if these forecasts turn into reality but at a minimum, I suspect that it may be some time before bears can take control of the grain and soy markets and for now, the path of least resistance should be higher.