Weather is the top issue for the late spring and summer months. If conditions are near normal, expect a sharp rebound in corn production and a moderate rebound in soybean production for 2013. This will complete the market’s perception of 2013 as a transition year. If weather worsens over this period, the trade will be eager to re-price new-crop production.
It’s important to monitor the six-to-ten day forecast from the National Oceanic and Atmospheric Administration (NOAA), the government’s weather agency, for updates each afternoon (available at: www.cpc.ncep.noaa.gov/products/predictions/610day/).
Another popular tool is the NOAA’s monthly update of the long-term seasonal outlook (available at: www.cpc.ncep.noaa.gov/products/predictions/30day/).The next updates will come on June 20. It was this NOAA update, on June 21 of last year, that helped to ignite the 2012 grain rally.
The USDA issues many helpful reports for traders to monitor. Every Monday afternoon, the Crop Progress report updates weekly changes in crop conditions. Once per month, the USDA issues the closely followed supply/demand report (WASDE). The next update for the WASDE report is on June 12.
Through these monthly reports, the USDA publicizes its view of the changing old- and new-crop supply picture. On June 28, the USDA will update its view of acreage as well as tell us how much of last year’s small crop is left over as of June 1. Because the March 28 update on old-crop stocks was such a market mover, expect a lot of interest on this one.
Those who closely follow the changing old- and new-crop pictures may be able to see some golden opportunities over the early summer. One note of caution: If you are trading from a fundamental approach during the summer, be ready to accept that conditions can, and will, change quickly — and they easily can change against your outstanding positions. As with all bad trades, accept when that happens and move on.
Rich Nelson is the chief strategist for Allendale Inc. His daily analysis can be accessed via www.allendale-inc.com.