A warm, dry weather forecast can be good for crops at this time of year, particularly for farmers who need to replant. However, good conditions can often pressure market prices.
Don Roose, analyst with U.S. Commodities in West Des Moines, Iowa, said this year may not bring that same price action as May has been a month of declining prices so far.
“We had a real rough week (May 15-19) with a series of negative news,” Roose said. “We had China cancellations, the debt ceiling concerns and a lot of negative things thrown at us. That took a lot of risk premium out of the market.”
He said the market looks a little oversold ahead of the Memorial Day weekend, and it wouldn’t be a shock to see that risk premium built back into prices soon. He said Plains states are still in a short-crop scenario ahead of winter wheat harvest, which could create a smaller buffer in the feed markets.
“The government threw out some big bearish numbers that helped press the market, and can we achieve those big yields?” Roose asked. “It’s a tipping point. We pressed the market down to oversold levels and there isn’t much risk premium in the market.”
With markets closed on May 29 for the Memorial Day holiday, Roose said traders will be taking that time to analyze crop reports as more scouts give updates on their field. Replant will also be well underway in areas that need it. He also said trade will likely be holding their breath until a deal is reached on the national debt ceiling, as defaulting on the debt would have wide-ranging impacts.
“It also looks like Ukraine is going to go on the offensive, so there is plenty of stuff to make trade volatile and nervous,” he said.