Weather is always a major concern for agricultural markets going into a growing season, but it has become especially important for U.S. crops this year.

Coming off one of the coldest and wettest springs across a broad area of the nation, conditions in the next few weeks will be critical in determining the size of 2013 crops and whether supplies that were drawn down by last year’s drought can be replenished. Prospects did not look very bright in late April as only 5% of the nation’s corn had been planted as of April 28, the slowest pace since 1984, and the winter wheat crop was feeling the effects of late spring freezes as temperatures dipped to 20 degrees or below three times in April.

It’s an abrupt change from 2012 when a warm March got the spring planting season off to a great start. But the promise of big crops faded last year during an unusually dry summer, sending prices of grain and soybean markets to record levels. Prices had been falling since those highs as analysts and traders looked ahead to bigger crops in 2013 . . . until Monday when traders realized big crop expectations may be in jeopardy if many acres can’t get planted.

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Source: VantagePoint Intermarket Analysis Software (www.tradertech.com)

The biggest shock to corn prices came when the U.S. Department of Agriculture’s late March reports revealed few surprises for planting intentions but much larger-than-expected stocks of corn on March 1, knocking nearly $1 a bushel off corn prices in two days (red circle). Critics see faulty measurements, either for the amount of corn stocks or for assessing the size of the 2012 corn crop. It’s become routine in recent years for these USDA reports to be called into question.

In any case, the March stocks report changed the perception for corn prices. Monday’s price move, the biggest daily move for corn in nearly a year, may have put a different slant on the corn outlook to keep July corn futures above $6 and new-crop December corn futures above $5 a bushel, at least temporarily.

The chart picture is similar for soybeans (not shown) and wheat. After double topping last fall, Kansas City wheat futures (now owned and traded by the CME Group) had fallen nearly 25% as traders anticipated a recovery from last year’s drought conditions. Everyone knows the winter wheat crop is usually “killed” a couple of times every spring, but this year’s concerns may be very real as at least a third of crop in key states is rated poor or very poor. Traders finally seemed to wake up to those conditions in the last week.

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Source: VantagePoint Intermarket Analysis Software (www.tradertech.com)

How weather conditions shape up in the next few weeks will be crucial to not only crop producers but also to those who trade or invest in anything related to agricultural markets or to anyone who pays grocery or restaurant bills. If planting of 2013 crops is delayed – or even prevented as is possible for spring wheat due to the late snow cover in the northern Plains and Canada – the impact on acreage and production would be likely to have bullish repercussions not only for crop prices and but also for key farm suppliers like Deere & Co.

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Source: VantagePoint Intermarket Analysis Software (www.tradertech.com)

It’s not “too late” for planting – yet. Traders may recall that 2009 also had a late, wet spring, followed by a cool, wet summer in the Midwest. Those conditions produced record corn and soybean yields, although the quality was poor and that’s not a desirable situation either.

With today’s equipment, farmers could plant half of nation’s corn crop in 10 days – if they have favorable planting conditions. Good weather could negate Monday’s pop higher, bad weather would probably lead to more bearish pressure on crop prices, which already have declined in concert with most commodity prices.

A bad spring does not mean a bad summer, as 2009 showed. A good spring does not mean a great summer, as 2012 proved. Weather forecasters are optimistic about the prospects for 2013, but, like most things related to markets, no one knows for sure what the 2013 crop year will bring other than traders will have to keep a close watch on what the weather gods deliver.