June 15, 2021

Commodity Insight: Waiting patiently for June 15

It will take 12 to 18 months of near-perfect growing weather in the United States for ending stocks of corn and soybeans to rise back to comfortable levels where the threat of “running out of grains” is no longer an issue.

Between now and then, the key to grain prices rests with the whims and ways of Mother Nature during the months of July and August, the heart of the growing season.

Without argument, there can be no weather issues that threaten yields or final production for grains. Any major weather issue moving forward will likely send corn and soybean prices to new all-time record highs.

Historically speaking, it is rare to have weather issues surface earlier than June. But according to agriculture.com in a piece written by Krissy Klinger here are some of her comments about this month: “The first half of May 2021 was the fifth coldest and ninth driest first half of May in 30-plus years for the Corn Belt as a whole.”

She goes on to state: “Precipitation has largely failed to materialize in the worst drought-stricken areas of the Dakotas, northern Iowa, southern Wisconsin, and much of Michigan.”

While reading her thoughts, keep in mind with grain stocks razor-thin there is zero tolerance regarding weather issues or grain prices will soar upward.

Klinger goes on to tout data from WeatherTrends369 by stating: “Mid-May will bring a period of more unsettled weather across the Central U.S. In fact, the week ending May 20 is forecast to be the sixth wettest in over 30 years for the Corn Belt. … Temperatures for the Corn Belt in the week-ending May 20 will trend the 10th warmest in at least 30 years.”

To be facing weather issues in May is a sobering thought based on history. Most grain analysts focus on the weather the day before or the day after July 4 to decide whether to be bullish on grains or not.

Such an analysis has been accurate from the years 2000 to 2020. However, my work relies on the years 1900 to 2020 and the key date is June 15, not July 4 — any signs of hot and dry weather on June 15 in the Corn Belt is a reliable signal suggesting Mother Nature is poised to cut grain yields and production.

Grain prices will be determined over the next three to four months by how tight the cash markets become with corn and soybeans and the final acreage mix regarding what farmers seeded in the spring — and, finally, the weather in North America.

And understand there is historic tightness with old crop soybeans and corn, which means any changes or revisions that are significant with the expected acreage mix will have king-sized and enormous impact on prices. Weather concerns will only add fuel to the fire.

To grasp fully how volatile all markets have become in today’s highly charged, emotional environment consider what has unfolded since May 1 with a host of markets.

A month ago, for example, bitcoin traded a tad over $64,400 each, but this week fell as low as $30,275 each. Old crop corn futures dropped $1 a bushel in less than two weeks. Old crop soybeans fell $1.63 in six sessions.

Crude oil slipped $5 a barrel in 48 hours. Dow futures did a nosedive to the tune of 1,800 points in four days. Front-month feeder cattle from early April to early May collapsed nearly $19.

From my book “Haunted By Markets”: “What if corn and beans have trouble germinating due to low subsoil levels? What if the summer is exceptionally hot and dry? What if another major global grain producer has crop problems? What if the record demand for soybeans and products continues while ending stocks are on the decline? The what-ifs are too numerous to mention.”

I wrote all that about the year 2000, but the same can be said about this year, 2021. And that is precisely where I stand today when viewing razor-thin stocks of soybeans and corn coupled with robust and insatiable demand from China amid weather issues bubbling up in Brazil and in the United States.

But, of course, the date at which I turn quite bullish and decide to press the long side of the grain complex is June 15. I am patiently waiting for that day to roll around before turning even more bullish on grains.

Keep track of the significance of June 15 by going to commodityinsite.com. That day will be here sooner than you think. And I personally await that historically important day with bated breath and a bullish lean because every bushel of grain is needed to keep prices from skyrocketing to new all-time historic prices.