Today, however, we find the key variable for each market to be distinctly unique from the other two. For wheat, the dominant variable is the weather in the western plains. For corn, the most important factor driving the market is U.S. planting. For soybeans, the market is keying off of U.S. imports of soybeans and soybean meal. Certainly the list of common variables is long and familiar, but it is difficult to remember a time when the lead drummer for each of these markets was so decidedly different.
Not surprisingly, each market walked its own path through the month of April. Chicago wheat (CBOT:WN14) started the month by moving lower until Kansas City took the lead and pulled all three U.S. exchanges higher. The oft-promised rains for the southwest never materialized and estimates for the U.S. HRW crop are now 150- 200 million bushels lower than they were a month ago. Kansas City rallied 75 cents during the last week of April alone.
Fortunately, for users of SRW, the weather in the east has been decidedly better. Quite understandably Chicago has been a reluctant follower and it ended the month only 20 cents higher than where it started. Spring wheat shares corn’s concerns about delayed planting so Minneapolis rallied more than Chicago, but less than Kansas City.
The above average rains in the Midwest have been a mixed blessing for the corn market. On the favorable side, they have helped eliminate some moisture deficits west of the Mississippi River that date back to last fall. On the unfavorable side they are threatening to push many past their ideal planting dates. The market has been quick to remember how last year’s excessive moisture led to nine million “Prevent Plant” acres, a majority of which were corn. December corn futures were a dime lower for the first three weeks of the month, but then rallied sharply to close 2% higher as planting progress fell well behind the 5-year average.
For the fourth month in a row the dominant feature in the soybean market has been the badly mismanaged Chinese program. Starting in January the market was pulled higher as crushers, resellers and shadow financiers built over-sized cash longs and shipped those positions to China despite negative shipping and processing margins. By the time they recognized their mistake it was too late to cancel U.S. shipments and they had caused an artificial shortage of soybeans here and of soybean meal in Europe.