The 2023 growing season started off wet and delayed planting of corn and soybeans in much of the Midwest by a week or two depending on the area. The wet trend ended abruptly and we are now looking at the beginnings of a drought in the most productive corn and soybean regions in North America.
The start to this season has drawn parallels from analysts to the drought year of 2012 in which the fall contract price of corn and soybeans gained over 50% between the end of June and the end of August. I have briefly looked at the impact 2012 had on various equities and I ask for additional inputs from the community.
Equipment manufactures: Bullish near term (fall '23, spring-summer '24). Most producers have crop insurance and drought is a covered peril. Thus even if there is a short crop most producers will be able to continue planned equipment purchases and potentially “splurge” on additional updates/expansions. (DE went from $55/share in 06/12 to $78/share in 01/13… 41% gain)
Processors: Very interesting. ADM went from $23/share in 06/12 to $18/share in 08/12, had a rebound and sell-off later in the year and then went vertical in March of '13. ($18-$25, 38% gain) BG initially sold off at the end of June and then had a long uptrend again into March of '13. ($45-$61, 33% gain) IF a true drought develops perhaps there will be dips to buy either for medium term options or long term shares.
Fertilizer: Bullish. Looking at weekly charts for both MOS and CF we see a clear uptrend from 06/12 to 10/12 (CF $24-$34, 41%) (MOS $38-$51, 34%)
I must stress that nothing is certain yet, if the pattern changes we may avoid a drought. But if we do see it continue to develop or worsen than there could be some strong trends to follow. Also, in '12 the market did not care until the end of June, so I would caution taking positions yet.
Once again, thanks for reading and please add your insights.
Karen’s a good follow on twitter concerning grain markets.
I’ve never known a farmer that has a good year. But also never known one that has a good year. Yield down price up. Yield up price down. No yield crop insurance covers. Could have an affect on supply chain though. This midwest no rain has been a solid several weeks now. Corn is still short here and noticed planting still going on last week. Could be something keep an eye on for sure.
Good morning, rains over last weekend were disappointing and the market looks like it is starting to care, both old and new crop corn and soybeans are looking to build some momentum. I have saved a few cities as a weather watchlist that gives a pretty decent big picture for the corn belt, and from this list it looks like there is a chance of rain over the weekend. At this point my plan is to play the CORN call I am in right now and see what transpires towards EOW. Now, this being said the rest of the market is bullish so right now it’s pretty difficult to say that we are weather dependent and not just following the rest of the market. It is worth noting that the fertilizer companies have lagged behind the rest of the market and we may see them catch up if the market is convinced that it’s time to go. Play safe and good luck.
Above is a link to crop conditions reports and the dates of release going forward. Usually they come out on mondays but with the holiday next week’s will be out on tuesday. It seems like the market does care about the less than ideal conditions to this point and perhaps a continuation of the weather pattern.
Ag Weather Forecast with Eric Snodgrass (in-depth) | Nutrien Ag Solutions | June 15, 2023 - YouTube Snodgrass’s short to mid-term forecast. TLDW, need a true El Nino pattern to develop in order to get substantial rainfall into the corn belt. Dryness continues at least for this upcoming week.
Nutrien's Morning Minute - June 18, 2023 - YouTube Today’s update. IA and MN saw some rain over the last two days but does not seem to be the “drought buster” that farmers in that area want to see. Also looking at heat building over the country’s mid-section towards the end of the week. I must stress that NOTHING is certain at this point but if the key corn growing regions continue with substandard moisture and increasing heat then in the next two weeks we could see some substantial bullish price movement in corn and soybeans. What I want to see in terms of a drought-fueled bull run in the ag equities are limit moves in corn. (I kinda want to say OR soybeans but I’m not sure on that, I honestly think the impetus would be the corn contract moves.) To refresh, if a futures contract gains or loses more than .45c in a day (for corn) the contract will be suspended from trading for the rest of the day. The next day will trade with “expanded limits” in place which is double the normal limit, thus corn could move .90c in either direction before trade would be suspended for the day.
I read something today that Illinois corn a week ago 9 percent was in poor to very poor conditions. This week 20 percent. This is corn country for most part and soybeans. Don’t think I’ve witnessed a drop of rain for 3 weeks. And little to none in forecast. Could actually be a really awesome long term play here if Midwest corn and beans burn out. With the inability currently to be trading high attention span stuff I might start looking into this
Pretty good weather channel that is laying out a setup of a brutal heat wave into large amounts of rain across the country for the next week and a half or so
I really hope that comes to fruition and we get some much needed rain here. However the pertinent part of that to this thread I think was as the diagram of the map filled with moisture much of the Illinois Indiana Missouri iowa Minnesota areas were largely still dry. That belt of states is mostly responsible for large amounts of soybean and corn production for the US. Not that this matters but the golf course I’ve played at nearly every weeekend for last 7-8 years. Fairways are burnt. The water the course with the lakes on the course. Which are now nearly dry they stopped watering to leave enough in the lakes for fish and geese to live. They now may close for a bit with inability to water. I’ve lived in area for long time and don’t recall this many days with virtually no rain.
Thats just the thumbnail, he goes over why there is a high likelyhood of moisture going through the entire Midwest over the next week or so
Is there a longer video than the 8 minute one? But to be fully forthcoming it’s going to take multiple days of continued ran to saturate the Midwest. We always say corn should be knee high by Fourth of July. For last several years with crop steroids that shit has been waist high. It currently wouldn’t scratch my ankles. Catalyst would know more as he deals with it daily. But it’s currently not good.
No, he mostly puts up short videos like that length when he sees trouble brewing and then goes live for extended periods when it comes to raise awareness in threatening situations
South and tornado alley looks brutal. Can only hope it makes it to the corn belt.
Looks like Sunday into Monday is his prediction on when it’ll hit the corn belt