Even after 35 years in this business, I still find it difficult to handle weather markets. They’re volatile, unpredictable and sometimes lack the ordinary and reasonable response to changes in the fundamentals that you might expect.

As a producer, it’s often even more difficult. If you’re in one of the areas in the central Corn Belt this year that has received more water than you want, resulting in drowned-out low areas and yellow corn and soybeans, it’s easy to assume that everyone else has the same problem. Conversely, if you’re in southern Minnesota and have what would appear in July to be a record crop on the way, you also can make assumptions that may or may not be true.

When looking at weather markets in corn and soybeans, because of production size, weather is most important in the states of Iowa, Illinois, Indiana, Minnesota and Nebraska. Last year Arkansas had one of the worst droughts in history. This year the Eastern Shore, particularly Maryland, is experiencing a substantial setback in production due to drought conditions. Unfortunately, droughts occur every year – somewhere. As I have often said droughts are like surgeries – there’s no such thing as a minor one if it is yours.

Making marketing decisions in this type of market is extremely difficult. No one knows for sure the extent of the damage due to wet weather but there is little doubt that some yields have been hurt.

On the other hand, all the higher ground is benefitting from the excessive water, and if history repeats itself, the gains in yield will normally more than offset the losses on low ground.

That said, I’m firmly in the camp that yields are still going to be quite large come harvesttime. I think it’s easy to assume that harvest is going to be early this year and, in the case of corn, much drier than last year. With the crop getting planted early and maturing early, the odds of having a harvest similar to last year are slim to none and slim already left town.

So what are you to do in this type of a market? I think you need to rely on two things:

  • Common sense.
  • Think profits – not just prices.

This may not be as difficult as some people think. When corn prices were under $3.50/bu., many producers did not have the opportunity to even cash flow this year. Now they do. The same is true in soybeans. There is better than a 50/50 chance that the late July rally in these markets will be looked upon as a gift to lock in profits.

Remember: You always have at least two crops to sell. In my mind, by this time of the year the crop that was harvested in fall 2009 is history. It’s time to concentrate on the 2010-2011 and the 2011-2012 crops. With good profits being offered at this point, weather rallies offer scale-up selling opportunities and if you sell out of the 2010 crop – start on the 2011 crop.

The overall world is still in a deflationary phase and weather rallies in a deflationary market should be sold.