Weather driving global markets

By Doug Tenney, Leist Mercantile

Weather. It was THE price driver for grains as the month of May began and a factor in several regions around the world. Flooding in southern Brazil, primarily in the state of Rio Grande do Sul, quickly became a major event in the first few days of May. Brazil’s soybean harvest was estimated to have reached 90% at that time. However, with Rio Grande do Sul (RGDS) experiencing major flooding as well as the loss of life, it became a big deal for soybeans literally overnight. It was estimated that soybeans not yet harvested in RGDS ranged from 4-8 million tons, or 147 million to 294 million bushels. The flooding resulted in 60-plus deaths in the first days of flooding. Rain totals ranged from 6 to 20 inches. Additional rains which took place in the following days pushed soybean prices to successive days of double digit gains of 28 cents and then 16 cents. Flooding was the worst since 1941. All of the sudden soybeans came to life when the doom and gloomers were convinced they could not rally. This weather event was a fundamental reason for the price gains in soybeans. Meanwhile, July 2024 CBOT soybeans finally broke through a 50-day moving average at $11.83 which quickly grabbed the attention of technical traders.

Additional weather events included drought conditions in Russia and the U.S. Southern Plains, as well as some overly wet regions of Europe. That combination helped push July 2024 CBOT wheat on May 3 when it touched $6.32 ½, nearly back to levels of $6.33 ¼ seen just one week prior. This price was still dimes away from the multi-month high of $6.66, reached when Russia bought U.S. soft red winter wheat several days the first week of December 2023.

It is imperative to take notice of this soybean combination of fundamental and technical events because they happened literally on top of each other. Often prices can reach major highs or lows based on technical reasons. Then out of nowhere a fundamental event becomes known to the market which ultimately helps prices reach that major level. Technicians monitor charts along with the myriad of formations such as bull or bear flags, candlestick formations, and a host of additional technical tools which can be mind numbing. Fundamentals can be almost any news event which manifests as a surprise which might range from drought to flood, a war event such as the Russian invasion of Ukraine, or other unpredicted critical world events.

July 2024 CBOT corn had been range bound in April from $4.54 to $4.40. It closed above the 50-day moving average of $4.45 on April 22. Then days later, it broke through its 100-day moving average of $4.60 on May 3, reaching a multi-month high at $4.68, and then closing at $4.60 ¼ on that same day. The first few days of May the Midwest was expecting up to four rain events into May 15. Weather along with improving corn cash basis levels combined to push prices higher into early May.

The May 10 monthly Supply and Demand Report provided the first glimpse of production and demand for corn, soybeans, and wheat. It was anticipated that the March 28 acres numbers from the Prospective Plantings Report would use the same acres numbers for corn of 90 million acres and soybeans of 86.5 million acres in that May 10 report. Last year corn acres were 94.6 million acres and soybean acres were 86.5 million acres. Expect that same report to detail similar yields to that of 2023 in which corn yields were 177.3 bushels per acre and soybean yields of 50.3 bushels per acre. That combination of the March acres numbers along with using last year’s yields are traditional for the first projection for the new crop year.

Look for the June 28 US Acreage Report to have the potential to be a major price mover.

Thought for the day. “First think. Second, believe. Third, dream. And finally dare.” – Walt Disney.

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