Weather and Markets - Monday, 28 April 2014

The CME has announced that they will be changing the Daily Price Limits beginning this Thursday, May 1st.  This process will be repeated each November 1st and May 1st, the new limits will be calculated by using the daily average price close per day for the 45 days prior to each of those dates.    The new Daily Price Limits will look as follows:

                            CURRENT         NEW

CORN                      $.40              $.35

SOYBEANS             $.70            $1.00

CBOT WHEAT        $.60              $.45

 

China now holds 45% of the world’s corn carryout.  What this means for 2014 U.S. corn exports is really uncertain at this time, but such hoarding tends to worry some investors that their purchasing of grain will certainly not be as aggressive as it has been lately.  On a positive note though China looks to possibly increase beef imports from the U.S. which is very encouraging news to livestock producers.

Again there has been escalating conflicts between Ukraine and Pro-Russian forces.  On Sunday Pro-Russian forces paraded several Western military observers taken as hostages and also put on display images of 3 bloodied Ukrainian intelligence officers.  The situation has become quite complicated with each side pointing the finger at the other, as all of this grows the U.S. has moved additional troops into Poland and Latvia and NATO has positioned 3 ships in the Black Sea.  The G-7 nations are meeting today to discuss what further sanctions need to be taken against Russia as the world waits and wonders if there is any way to avoid some kind of military involvement from occurring.

The flow of money is continuing to support grain prices.  Several large banks, investments firms and money managers are recommending their clients buy hedges on wheat and corn to offset the risk of “geopolitical events”.  Many political analysts have warned that the recent crisis in Ukraine is the most important geopolitical event since at least 9/11 and perhaps even as far back as the Cold War.  Kevin Van Trump of Farm Direction cautions market investors though that “we are in a major transitionary phase, those money-managers and investors who made the jump to “distressed debt investing” back in 2008 are now those creating the “event driven” crowd.

The weather is currently causing wide spread planting delays throughout the Corn Belt.  A large high pressure centered over south central Canada with a lee trough of low pressure has developed across the U.S. Plains.  Due to the position of these pressure centers a large flow of Gulf moisture is available to feed several rounds of showers and strong storms that have the capacity to create widespread rain events with locally heavy rainfalls is possible.  The trade will likely be focused on the extent of the rainfall and the resulting planting progress. 

 

Today the World Weather Inc. Outlook reported these findings the details listed are taken directly from their publication (shown in part with only relevant information included for our purposes).

  • U.S. Midwest-Planting will be sluggish through the next 10 days to 2 weeks across the Midwest.  Additional rain through Tuesday and cool temperatures and light shower activity Wednesday through Friday will prevent fieldwork from resuming in much of the Midwest.  There is potential that lower portions of the Midwest will see better drying conditions sooner and fieldwork could resume later this week.  Another round of rain will occur in many areas Saturday into Monday, but some southern areas should remain dry and fieldwork may advance before the next round of rain occurs May 5-8.  A follow up rain event May 9-12 will extend planting delays if it occurs as advertised today.”
  • “U.S. Delta/Southeast-Mostly dry and favorable conditions for planting occurred in large parts of the Delta and the Southwest Friday into Saturday before rain returned Sunday from central and northwestern Georgia…Rain will continue in the Delta today and will spread across the southeastern states today into Tuesday before most areas see several days of mostly dry and improving conditions for fieldwork.  Fieldwork should become aggressive in many areas late this week into this weekend.  Shower activity will increase May 5-13 and fieldwork will be slowed, but some planting should advance between rounds of showers.”
  • “Northern Plains- Weather will continue to be rather wet through Tuesday with lingering showers Wednesday and Thursday.  A weak Canadian front will move through the region Friday and Saturday to induce a few more showers of light intensity. Another system May 5-6 and a larger event May 8-9 will see to it that rain falls frequently across the region resulting in slow fieldwork.  There will be no large storm system like that of early this week again during the coming two weeks which may support eventual drying.  However a warmer temperature pattern and a more absolute dry pattern are needed to promote the best drying conditions so that aggressive planting can take place.  Some progress is expected but most of the fieldwork that evolves in the next two weeks will be sluggish.”

The 30 day forecast is out and calls for temperatures across the region to be below normal but precipitation to be above normal.

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