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Palouser
Senior Advisor

Watch the trends and have your ear to the ground

By trends I mean those that affect 'physical', as opposed to technical or financial. The expression of physical trends and conditions will always swamp other influences under normal circumstances. During lulls in physical trends, or periods when many factors seem to balance each other out, it may not seem like the case.

 

For corn it is the unprecedented demand vs a rosy production outlook in terms of sheer quantity. But when we move toward historical extremes it seems that normal production variation is more of a threat. There are too many areas with short to nonexistent subsoil moisture to be complacent about production. For wheat the situation is even 'more so'. Russia, Ukraine and parts of Europe got dinged early and the possibilities in the future are worrisome. And the good progress of wheat in the southern plains can be ended in a matter of days - almost right to the end - by short subsoil moisture.

 

Of course fall wheat is a bit easier to detect trends as compared to spring planted corn - with the exception of subsoil moisture. Rain can keep pace with crop demands. But the risk is identifiable and large if the rain doesn't keep pace. It isn't predictable but, in some sense it's quantifiable in general terms. But the 'markets' (paper) tend to focus on the last rain and discount something like subsoil moisture issues. But, when the rubber hits the road the market can seem to jerk into reverse in a surprising way over a sudden and widespread recognition of a problem that can't be fixed by anymore additional acres or a completely different source.

 

Keeping the risk factors in mind while the market concentrates on immediate, and ultimately irrelevant, problems is something producers have to work on. Other issues can seem more threatening at any given moment and have more interesting 'explanations'. But they don't usually cause crops out in the field to stop growing or reduce their physical potential.

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