When does the market start to focus on the US drought. Planting isn't to far off in the southern states and Texas is looking really bad. At a minimum, subsoil moisture is going to be non-existent this year.
I agree with much of what you said and you are correct to say that we don't have droughts often. But I think it's safe to say that 2/3 of the country is in some kind of drought condition. That little sliver through Iowa, Indiana and Illinois (you can throw Ohio in there if you want) can grow an awful lot of grain, but it can't make up for 15 other states either.
It's going to take a drought to pull grain prices out of the basement.
Grains seem to pull moisture out of the air anymore.
"The South--and Texas don't grow enough corn and beans to make a difference. The "corn belt" looks good, moisture wise. Way too early to worry about "drought." We seldom if ever have a drought.
Weather will not affect crops very much, until July and August."
The 100% opposite of what you said is going on. Good catch by Jim in noting the drought. The market has been trading it for several weeks now.
Beans are up 42c from the lows, SRW is up 40c and HRW in the heart of the most severe part of the drought has soared 57c. Even corn is finally showing a potential upside break out, up 16c and trading at its highest level since early Nov. 2017.
Smart traders know that the market does not wait until July and August to see what the weather will be like or assume that the widespread drought now will go away.
The last 2 widespread Cornbelt droughts, 1988 and 2012, started like this and during similar La Nina years.
Droughts don't happen overnight. They develop over months(like this one-many places have not seen a good precip event in over months) with a persistant weather pattern, which tends to persist, sometimes for months until something impossible to predict breaks it down.
Though there is plenty of time for rains to replenish soil moisture before the corn and beans growing season, if you want to trade what the market is trading on right now, you need to be trading the drought.
You must not have been following the grains news this week. The dormant Winter Wheat crop is already being hurt badly by this severe drought in #1 producing Kansas, with USDA crop ratings nosediving:
This is what caused the gap higher Sunday Night. This is what caused the even bigger gap higher on Monday Night. We tested the top of the gap last night and are back near the highs in KC wheat for this week.
During the Winter of 2000, we also had a similar drought that rallied grains big time from Jan until early May, then the rains came and we dropped hard for 2 months, only for drought to return in July......but the crop was almost made by then.
Look at the comments for KS and OK for the link below. I would cut and paste them but this forum gets messed up in trying to do that:
https://www.nass.usda.gov/Publications/Todays_Reports/reports/stwe0518.pdf
The dropping dollar is also adding to the buying but the funds are covering all their massive wheat and corn shorts, mainly because of the widespread drought and potential for it to effect this years crop.
The market knows that if we start the season with subsoil moisture that is depleted, it will take much more rain than usual to have the same yields with high subsoil moisture.
It's already causing HRW production estimates to fall.....even if good rains come. Note how bad the crop is doing right now. Even perfect weather in the Spring will not offset the damage that has already occurred......poor establishment, Winter Kill from cold, desication from dry soils and extreme stress.
Vandenplas, you continue to demonstrate -
Who you are, and -
Why you are here.
You also demonstrate beyond a shadow of a doubt the wisdom of Popeye, when he said -
IYAMWATIYAM.
cfdr,
You will note that vandy only attacks quality posts and posters here.
Never goes after mojo or truth or dare or ridiculous delusional Trump hating posts that completely ignore the fact that he has been one of the most successful first year presidents in history.............despite the dems and obsessed media doing everything they can to block everything he does and impeach him vs working towards making America Great.
vandy also claims to be a republican.
Then, he pretended to know something in a post about weather, grains and markets and I couldn't resist responding with an authentic post about what is really happening(the complete opposite of what he projected) to show the fraudulence.
Yes. As far as markets being influenced by drought fears, I just got off the phone with my long term friend from Chicago. He has been a broker for about fifty years now - I got to know him at the Foundation/Cycles conferences in the early 90s. The potential drought is definitely a focus right now. Of course, that can quickly change, but right now it is a force in the grain markets.
Thanks again - always enjoy reading your posts.
Thanks for a great summary, mike.
You're welcome cfdr and cutworm!
We're under some pressure today, partly from the big precip event coming in the next week in many of the drought areas.
http://www.wpc.ncep.noaa.gov/qpf/p168i.gif?1517592916
It will miss the driest areas however,including KS and the main HRW belt which is why HRW is the strongest again today, as it has been for a few weeks because of the drought.
It should be dry in week 2, then we may have a new southern/subtropical branch of the jet emerging in late Feb that might introduce some rain in the far S.Plains......speculative on that.
Last Euro model out early pm had new system with precip in C.Plains at day 10, where before it was dry.
Also, early pm GFS ensembles had the previously mentioned speculative subtropical, southern jet into the S.Plains with precip in 2 weeks.
This finally put a bit of pressure on the KC wheat(HRW) that has been refusing to go down because of the severe drought and condition report that shows it has already adversely effected the crop rating.......which has plunged over the past month.
http://droughtmonitor.unl.edu/
Looking at the rather huge amount of drought, the biggest I see is in the upper Colorado River drainage.
Going to be a rough year of LA vs farmers
