The Corn and Soybean Crops look very, very good:
“The USDA estimated corn emergence at 92%, a 12% increase from last week and 2% ahead of the five-year average. In speaking with farmers around the Corn Belt, despite earlier concerns of northern corn acres switching to soybeans, most were able to get their corn planted with very few having to switch any of their acres. Corn conditions remain extremely positive, with 75% of the crop rated “Good” or “Excellent” compared to 63% at this time last year. 21% was considered “Fair,” while 4% was considered “Poor” or “Very Poor.” Severe weather peppered parts of Iowa and Nebraska with hail last week, impacting corn conditions in those areas. Strong winds were reported in areas of Illinois, Iowa, Minnesota, and Nebraska last week, although winds did not impact conditions due to how short the crop was.”
Grain prices are dropping with this bountiful crop report. As we all know by looking out our windows here, the pattern has been very wet…the drought that has gripped Texas and Oklahoma is breaking a bit. This is typical of an El Nino pattern, though the ‘experts’ will not yet point to two weeks of weather as a definite harbinger of El Nino’s arrival…
Speaking of El Nino, Part I: This comes from the folks at Freese-Notis, who have been tracking and commenting on ag weather for decades:
“Even if some cuts are made to the initial 165bu/acre forecast, conditions across the Corn Belt would support national yields pushing 170bu/acre. As high as this number may appear, if 2004 and 2009’s corn yields were adjusted to the present, yields would be 179bu/acre and 174bu/acre, respectively. These two years exhibited near ideal growing conditions for most of the Midwest, and illustrate the fact that 165bu/acre is actually a very conservative forecast, assuming an emerging El-Nino supplies favorable growing weather throughout the summer months.”
The bolded areas should ring a bell, one I have been ringing for months. This current season has been somewhat meteorologically analogous to 2009 and then 2004, both of which were El Nino harvests.
Speaking of El Nino Part 2…this is the latest (June 5th report) from the Climate Prediction Center:
“The chance of El Niño is 70% during the Northern Hemisphere summer and reaches 80% during the fall and winter“
Deeper into the item, it would appear that most models are now pointing to a moderate strength El Nino. The last strong El Nino event we had was 1997-1998 which was the warmest year the planet has ever seen. The last El Nino event of any type was a Mild event, began in the fall of 2009 and lasted into 2010..which was also a grain drying year that brought the industry to its knees.
The corn crop is off to an amazing start and with a 70% chance of the El Nino settling in this summer, that points to an amazing corn harvest…it also means a wet fall, too. I remain optimistic for a significant corn drying year this year.
Here is a map taking into account El Nino year averages through the 2002-2003 El Nino showing temperate mean variances
The Southeast is cooler and wetter during El Nino years, which could lead to a very, very nice HDD winter for dealers in that region. Fewer HDD’s in the Midwest, and El Nino weather patterns are ‘zonal’ in that the flow west to east across the states, which tends to cut off the ridging systems we saw last year, aslo referred to as ‘polar vortexes’.
We’re still a ways off but the El Nino evidence has been there since December when I first started talking about it and it grows more likely every month. It does set up for a shaky 1Q temp wise, historically, in the Midwest and likely consistent demand in the SE. The Northeast also sees lower than normal HDD’s. This is not to say folks will be breaking out the Coppertone, but a repeat of last winter’s extremes do not seem likely at this juncture.
Even if HDD’s are lower in 1Q, the grain drying demand, if the typical El Nino patterns materialize, could see retailers blowing through their grain drying contracts and starting on home heating contracts earlier than they’d like, which could put the marketplace into a hand to mouth buying situation come January.
I know I may sound like a broken record on some (if not much) of this. But I see these as THE big factors needed to analyze for this coming winter. We can sit here and pick apart inventory reports all we want, but exporting will kick back up to higher levels soon and I anticipate the builds we have been seeing will tail off due to that as well as a large summer fill season across the country. Keep picking up pieces in the dips and you’ll come out a winner in 4Q14.