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Morning markets: Leadilocks keeps crop prices heading higher

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What's the opposite of a Goldilocks situation? You know, as in the fairy story of the girl and the three bears, one of whose porridge is too hot, the other too cold, and the third one just right.

Leadilocks perhaps? Answers to please.

Anyway, the term would describe crop weather, notably in North America, but in some other major producing countries too.

Unlike the "just right" Goldilocks situation – as in the low inflation, high growth, just right Goldilocks economy - the weather is too wet in large swathes which need to be sown with spring crops, and too dry in areas of winter grains which need wet to approach anything like reasonable yields.

'No room for late planting'

And it looks like staying that way.

For US hard red winter


districts, for instance, "the current weather forecast continues to favour the more eastern and northern parts of the belt, while no doing much for the driest areas in southwest Kansas and the panhandle regions of Texas and Oklahoma," Dave Lehl at Benson Quinn Commodities noted.

In spring wheat areas of the US and Canada, "some regions still have over 100mm of snow cover and, with below-average temperatures forecast for the next month, the spring wheat crops in these regions could be planted two-to-four weeks behind schedule", Australia & New Zealand Bank said.

This is a problem for


this year too, given the level of extra corn sowings that farmers in the states of North and South Dakota had in mind, let alone the damp in the Corn Belt

"Traders are watching the Dakotas, where planting is supposed to increase 1.3m acres on corn this year. That could be in jeopardy," Tim Hannagan at PFGBest said.

"With near-record low ending stocks there's no room for late planting that generally brings lower yields and or loss of acres."

'Major issue'

While late corn sowings would in the US favour soybeans, which are later planted, in Canada, prices of the main oilseed, canola, are showing signs of responding to sowing concerns too.

"We would note canola is perking up, as the weather situation in Canada indicates a slow start to their planting season," Mike Mawdsley at Market 1 said.

Canola is being helped by worsening prospects for rapeseed in the European Union, the top producer and consumer, where dry weather is the problem.

"Below average rainfall in France, Germany and the UK are a growing concern," ANZ said.

"Wheat and rapeseed crops are not yet under threat of yield declines, but further moisture deficits could see Western Europe emerge as a major issue in May."

The bank added that in China, the top wheat growing country, "rainfall has tended to fall south of the main wheat growing region.

"Dryness is an issue with yields now being impacted as the crop starts heading."

Currency help

So, in short, crop markets were set up for another firm start.

Especially when fears over the macroeconomic situation, and US debt, were on the backburner too, allowing the


(perversely) to fall 0.4% against other currencies and making dollar-denominated assets such as many crops more competitive as exports.

Shares performed better, with Tokyo's Nikkei index closing up 1.8%.

Corn, which has lagged wheat of late in the old crop, was especially firm, adding 1.2% to $7.57 ¾ a bushel for May delivery.

Chicago wheat added 0.6% to $7.90 ½ a bushel for May, with the May soybean lot up 0.7% at $13.51 a bushel.

Slowing down

Nonetheless, there were signs that investors may believe some prices have done enough for now.

Kansas (hard red winter) wheat, which led the rally in the last session on the drought concerns, added a further 0.2% to $9.27 ½ a bushel for May, with new crop lots faring no better. September, for instance, was 0.2% higher at $9.52 ½ a bushel.

Minneapolis (spring) wheat added 0.5% to $9.48 a bushel for May with the September contract up 0.4% at $9.59 a bushel.

Meanwhile, new crop December corn, which has been on something of a roll itself, gained just 0.1% to $6.76 ¾ a bushel.

Holiday ahead

One reason for caution was the prospect of a long weekend ahead, with Friday an Easter holiday on both sides of the Atlantic (and Monday too in some countries, eg the UK).

"Charts look friendly, but the market may lose some momentum with a long weekend coming up in a weather market," Benson Quinn's Mr Lehl said.

"Sideways to higher seems likely before we come back next Monday on what could be a very volatile start to next week."

The broker also noted options expiry on Thursday, which for corn is favouring prices of $7.40-7.60 and, for soybeans, around $13.30-13.60, given where the strike prices of the options are grouped.

'Bend in the jet stream'

Then there is the prospect of a change in the weather turfing Leadilocks out on her ear.

"All this gloomy weather as related to fieldwork and planting delays could change in a simple bend in the jet stream," Mr Hannagan said.

"If traders see an end to the extreme wetness and a window to open to planting, futures will fall sharply as funds fat with long weather profits will run for protection."


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