‘Rain makes grain’ mentality appears again in this week’s market news

As the drought sets in even deeper in the western United States, markets continue to express it.

“I think the market mentality is that the rain makes the grain,” Rook said on Friday. “And it’s kind of a tug-of-war between east and west.”

The winner of this contest is in the hands of the weather, and the drought monitor showed little improvement in North Dakota, South Dakota or Minnesota this week.

In Iowa, heavy rains were expected, but they only arrived in the southern part of the state, which was even enough to show up in the markets.

“The market actually recovered a bit late on Thursday after this news,” Martinson said of the rainfall in southern Iowa.

Martinson said the tri-states account for about 19% of the country’s corn acres and 23% of the acres.

“So we control a lot of the product,” he said.

But the yield of drought-stressed crops from North Dakota, South Dakota or Minnesota could be the deciding factor.

“Is seems to have a pretty good harvest ahead,” Martinson said.

Rook has the lead at the moment, but said that could easily change.

A Supreme Court ruling on Friday sided with oil refiners against the biofuel industry, and pushed the market back from the small bump it suffered from the rain.

Support from the Supreme Refinery Court in the biofuel waiver dispute is expected to lower demand for corn, soybeans and other biofuel crops, Martinson said.

“It solidified the losses for the week,” he said.

Rook said the move appeared to cause an “overreaction” in the markets. Martinson shared this point of view.

“After seeing what the decision was, it didn’t seem like it should have crashed this market,” he said.

Martinson said weather issues and a few other minor items likely contributed to the sale.

Quarterly inventory reports and the acreage figure will be released next week, Rook said, which will likely create more movement in the markets.

To watch previous episodes of Agweek Market Wrap, click here.

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