B RIAN HOOPS
The month of April followed the seasonal pattern of weakness for corn prices as corn closed 12 1/2 cents lower. Now, what to expect in the month of May.
U.S. producers should finish planting the 2009 corn crop by the middle of the month and weather will then be 95 percent of the pricing influence. Ending stocks for the start of our harvest is projected at a 1.7 billion bushels and the May 12 USDA monthly crop report looks to leave our old crop carryover stocks number unchanged as our export pace is steady, but unspectacular.
After the report, weather will be the only thing left for traders to trade on during the last half of the month. If weather is warm with ample moisture, prices will retreat into the end of the month and the highs for the month should be in by May 12.
However, if weather becomes hot and dry, prices will have no choice, but to trade higher in an attempt to ration U.S. ending stocks as U.S. producers look to seed less acres this spring.
The month of May is too early to create annual highs, especially if weather conditions are adverse as prices should peak during the June through August growing season.
With the uncertainty of the upcoming growing season, funds and commercials should look to buy weakness ahead of the key pollination timeframe in late June, just in case weather conditions become adverse.
The month of April was bullish for soybeans as markets rallied to close April 51 1/2 cents higher. Now, what to expect in May. The month of May is when U.S. producers begin to aggressively seed the 2009 soybean crop. Weather will become the number one pricing influence once 30 to 50 percent of the crop has been planted.
With the ending stocks for 2009 projected at only 165 million bushels, the market has minimal room for error this growing season. However, prices will become very sensitive to weather issues during the summer as speculative shorts will look to cover aggressively if weather problems develop.
As a result, the commodity funds and commercial entities will use weakness in prices during the planting season to buy September and November futures in anticipation of weather premiums being added as planting progress reaches the 50 percent pace.
Prices should peak into the June through August growing season, as the market will fear dryness or heat or both at key yield time, which could cut production for the 2009 crop and lower our carryover stocks.
The May 12 USDA monthly crop report looks to attract small buying ahead in case there is a surprise in the report.
The only negative scenarios are the possibility of increasing planted soybean acres this spring and of good growing conditions into the last half of the month.
If weather conditions are favorable, look for prices to retreat and funds to liquidate long positions if the technical trend turns lower. The fundamentals determine price direction, so watch weather in the last half of the month.
The month of April was bearish for prices as wheat closed 8 3/4 cents lower. Now, what to expect in the month of May. In early May, weather conditions look warm and wet across the Plains. Winter wheat ratings are currently 45 percent good to excellent, compared with 46 percent last year.
May is the key reproductive month for winter wheat as approximately 21 percent of the crop is in the head stage. Winter wheat is now in need of light rain followed by warm and sunny conditions. A hot and dry weather pattern early in the month will send prices sharply higher.
By the middle of the month and into the end of the month should produce lower prices as the market prepares for harvest and the key reproductive timeframe for wheat will be past.
Of course, adverse weather during May will send prices soaring. The spring wheat crop is now only 15 percent seeded, well behind the normal pace, and has the entire growing season ahead.
If further weather problems occur in the key spring wheat states of Minnesota and North and South Dakota, Minneapolis wheat futures look to explode higher. If normal weather patterns occur, seasonal weakness looks to prevail by mid-month and pressure prices.
Brian Hoops is president and senior market analyst of Midwest Market Solutions Inc. Midwest Market Solutions is a full-service commodity brokerage and marketing advisory service, clearing through R.J. O’Brien.
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