Corn and Soybean Planting Ahead of Schedule, But Weather Holds the Key to Prices

Early Progress Doesn’t Guarantee a Bountiful Harvest

Despite a challenging spring for many growers, planting of key row crops—corn and soybeans—is progressing at a faster pace than average, according to recent data. However, experts caution that the critical weather conditions for successful crop development are still ahead, and price volatility remains a significant concern.

Planting Pace Surpasses Expectations

The latest USDA Crop Progress report indicates that 97% of the corn crop in the top 18 producing states has been planted, aligning with the five-year average. Soybean planting is even further ahead, reaching 90% completion compared to the typical 88% for this time of year. This early start provides a foundation, but doesn’t ensure a successful harvest.

The Looming Impact of Summer Weather

The weather patterns unfolding between June and August will be pivotal in determining final crop yields. As Bryan Doherty of Total Farm Marketing points out, past events demonstrate the potential for rapid price swings based on weather conditions. For example, in 2012, drought conditions triggered a significant rally in corn futures prices.

“The weather will have its greatest impact on crop production in the months ahead. As the weather goes, so likely will price.”

—Bryan Doherty, Senior Market Advisor

According to the National Oceanic and Atmospheric Administration (NOAA), the Climate Prediction Center forecasts a greater than 70% chance of El Niño developing this summer, potentially bringing altered precipitation patterns to key agricultural regions. NOAA El Niño Forecast

Three Potential Scenarios for the Harvest

Growers and end-users face three primary possibilities: favorable weather leading to expected yields, insufficient weather resulting in reduced supplies and price increases, or exceptional weather producing larger-than-anticipated crops and lower prices. Proactive planning is crucial to navigate these uncertainties.

1. Adequate weather conditions will support expected crop production.
2. Suboptimal weather will lead to smaller supplies and a potential price rally.
3. Exceptional weather will result in larger crops and decreased prices.

Strategies for Managing Price Risk

Doherty recommends a balanced approach to risk management, such as forward selling a portion of expected production while simultaneously purchasing put options to protect against downside price risk. He also suggests considering call options on forward-sold bushels to capitalize on potential price increases.

“Prepare yourself for future price movement now, when volatility is low. Take a balanced approach… This means proactively planning for prices to move in either direction.”

—Bryan Doherty, Vice President of Brokerage Solutions

Working with a professional advisor is essential to develop a strategy tailored to individual operations. Open communication and a thorough understanding of potential consequences are key to making informed decisions, rather than reacting emotionally to market fluctuations.

Ultimately, preparation and a well-defined plan are the most effective tools for navigating the uncertainties of the agricultural market and maximizing the potential for a successful harvest.