The clock is ticking for US corn and soybeans. With US corn and soybean plantings stalled near their slowest paces in 10 years, world grain traders have been ultra-sensitive to any change in weather guidance for the heart of the Corn Belt. That region is the key to more than half the world's corn exports and more than a third of soy exports.
Despite the weak world economy, export demand for grains - notably, from China for US soybeans, a key food and industrial oilseed - has kept the benchmark prices at the Chicago Board of Trade buoyant. CBOT spot contracts last week saw soybeans touch a seven-month high at $11.66 a bushel, corn a five-month high of $4.31 and wheat a three-month high of $5.94.
The key has been the cold, rainy weather in the US Midwest, where the bulk of the 160 million acres of corn and soybeans are currently being planted. Every day from now until early June is critical for corn, which is planted before soybeans, which have a shorter growing season. Corn yields can be cut by a bushel per day every day a field goes unplanted from May 15 forward. If corn is not seeded by June, those intended acres will likely go to soybeans.
The weather and China soy demand have built in the premium to grain prices, along with recent strength in other basic raw material prices like oil, gold and sugar. Traders and analysts see little change in that dynamic over the coming week.
For example, if forecasts late last week calling for a significant break in spring rains are accurate - giving farmers a renewed shot at planting corn this season - Chicago Board of Trade grain prices would likely be under pressure soon. With today's farming technology - 24-row planters, tractors with lights and GPS guidance to control seeding - Midwest farmers can plant round-the-clock.
That's exactly what they will do if the weather allows in the coming week. "If we are in for a little bit of a correction in the outside commodity markets, and if that comes in tandem with favourable weather, then the next 20 cents in corn is probably down and maybe 30-40 cents in beans may be down," Rich Feltes, senior vice president at MF Global Research, said on Friday.
The next indication of how much time farmers have to make up on planting will come on Monday afternoon when the US Department of Agriculture issues its weekly crop progress report. CBOT traders on Friday expected USDA to report US corn planting at 60 percent to 65 percent, compared with a normal pace near 85 percent. Soy seeding was pegged at 25 percent versus a typical pace of roughly 45 percent by mid-May.
The eastern Corn Belt - Illinois, Indiana and Ohio - are lagging well behind the west. But the northern Plains where high-protein spring wheat has also seen serious delays could see the clouds part in coming days. The extended outlook there on Friday called for warm temperatures and less rain. But, as every farmer knows, betting on the weather is the definition of a risky business.
If the weather stays cold and damp, grains will likely continue to build in additional weather premiums "bringing us to technical levels that attracted managed money back into commodities," one CBOT grain broker noted. Aside from Mother Nature, Chinese demand for soybeans is the other wild card leading the CBOT grain complex.
"I don't think there is another commodity that has the same demand prospects that the soybean market does," said Dan Basse of AgResource, a consultant. "It's almost unstoppable." US soybean export sales are now up 13 percent from a year ago at 32.8 million tonnes, with sales to the world's top buyer, China, up 42 percent.
Concerns about stalled shipments from Argentina have fed more demand from China from the United States, traders say. But even sales to China for next season is up twelve-fold compared with a year ago at 2.8 million tonnes. The strong demand forced USDA last week to trim its estimate for the amount of soybeans that will be left at the end of this season's marketing year in August, to 130 million bushels - a five-year low and a 15-day supply.
That will mean more volatility for the popular July/November CBOT bean spread. Already, the price difference between old-crop July soybeans and new-crop November soared to $1.55-1/2, premium July - up more than 20 cents in a week. So US weather and soy export news will be key for grain traders.
But outside markets - equities, the dollar and crude oil - will also be monitored for the shifting life signs in the global economy, thus demand. Those may also play a role. More optimism about the economy is spilling over to commodities, signalled in the Reuters-Jefferies CRB index of 19 commodities which notched a five-month peak last week.
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