Grain markets still watching South American weather

(WJBC) – Grain markets started off the week with better prices following last week’s sell off.

Traders are watching weather in South America, which is again lending some support. Argentina still on the dry side, although they have had some rain. The damage is done on corn, but now the focus will turn to conditions for soybeans in that region, according to Aaron Curtis, commodity risk consultant with Mid-Co Commodities.

Outside markets also continue to influence grain markets, as a weaker dollar on Tuesday offered some support to outside markets. But grain markets are mostly trading the weather at this time.

Overall, corn production numbers came in higher than expected in Thursday’s USDA report, but ending stocks are still historically tight. The market will continue to put pressure on producers to plant another good corn crop moving forward. Ethanol numbers continue to be strong, and weekly exports increased a little bit, as well.

Curtis said the scenario is similar to this time last year.

“Kind of like what we did last year, we come into the year knowing that we needed a good crop to kind of build ending stocks,” said Curtis. “That didn’t happen, of course, as we saw yields continue to deteriorate as the summer went on, and now we go into this year with kind of that same mindset.”

On the soybean side especially, South American weather continues to be important to price moves. And, China continues to influence global demand more than any other country. Weather in areas like Ukraine and other places also means more to the market than it did 15 or 20 years ago.

“Any morning you could come in here and have some dry weather or wet weather in some part of the world, and it could influence our day to day price movement,” said Curtis.

Drought maps show a little more dryness than desired in areas of northern Iowa and southern Minnesota, but overall there is not a lot of concern going into the spring. It is also dry in the south and southeast.

“But as far as the main areas of the Corn Belt, we’ve had enough moisture here that the drought monitor index seems like we’re going into the spring in fairly decent shape moving forward,” said Curtis.

That is good news, as Informa Economics projects upwards of 94 million acres of corn to be planted this spring.

“We’re going to need good weather not only in Illinois to accomplish that goal but also up in areas of North and South Dakota where in the last couple of years they’ve had a little bit of a struggle getting in in a timely manner,” Curtis said.

There is the potential to produce a lot of corn this year if the weather cooperates for planting and throughout the growing season.

The next USDA crop report comes out February 9, although Curtis said the rest of the winter reports are typically non-events. March 30 will be the Prospective Plantings report, and then May 10 will give the first look at carryout for next year. Those could be major market movers.

Until then, weather and outside markets will be top of mind for the grain trade.