Take my El Nino conversations, for instance. I began writing to my customers about El Nino back in December. Then this spring the meteorologic community raised the likelihood of an El Nino event happening this fall to 70% and one setting in during late 4Q at 80%. El Nino conditions are not bullish in the Midwest and Northeast, but can be in the Southeast. So I don’t just search for the bulls, which to be blunt are easier to sell gallons against. I enjoy being correct far too much for that and I also enjoy helping you make as much money as possible for your businesses and families.
Now, let’s fast forward to the ‘news’ or general thinking of today, the 30th of July.
The Headline: El Nino Indicators Ease.
The Quote Part I: “While the chance of an El Niño in 2014 has clearly eased, warmer-than-average waters persist in parts of the tropical Pacific, and the (slight) majority of climate models suggest El Niño remains likely for spring. Hence the establishment of El Niño before year’s end cannot be ruled out. If an El Niño were to occur, it is increasingly unlikely to be a strong event. Given the current observations and the climate model outlooks, the Bureau’s ENSO Tracker has shifted to El Niño WATCH status. This means the chance of El Niño developing in 2014 is approximately 50%, which remains significant at double the normal likelihood of an event.”
The Quote Part II (from theweathernetwork.com): “What’s going on this year, at least so far, is that the ocean surface temperatures are behaving roughly the way they should for a developing El Niño. Temperatures are warming up in the eastern and central regions of the equatorial Pacific. Specifically, the temperatures in the central Pacific (what forecasters call the Niño-3.4 region) have been about half a degree above normal, which is one of the criteria for declaring that El Niño conditions are present (but not that the El Niño is in full-swing). That’s only one condition, though. Since the atmosphere plays a big part in this, it has to follow suit with the ocean temperatures, or the whole thing breaks down. So far, the atmosphere is still behaving like it does under neutral conditions. According to Emily Becker, of Climate.gov, “the wind patterns are roughly average over the tropical Pacific, with some slight weakening of the trade winds toward the end of the month.”
The Takeaway: This is a pretty dramatic drop in confidence from earlier predictions and the atmosphere is to blame. The first quote is the Australian Meteorology Division and they are as keen or more so as it relates to El Nino events, as their country is typically decimated by drought and heat during such periods. The biggest line that drew my attention was the one I put in bold and underlined: “…remains likely for spring.” This El Nino, once feared to be a monster, has been downgraded for the past six weeks to an ‘if it happens, it will be a weak one’ to now possibly getting pushed out to Spring of 2015,, which can also mean not happening at all. The atmospheric winds have not played their part and are nowhere in sight.
So what does that mean for the propane industry?
We continue to see the ridges and troughs in the weather pattern, the cutoff low pressure systems in the northwest which are bringing warm temps along the Pacific region all the way to Alaska, like we saw last winter. And just like last winter, ridging in the west allows colder air from Canada and the Arctic to swoop down into the central, eastern and southeastern as we saw last winter. Some dubbed it the ‘Polar Vortex’ and I admit to using the term, but it’s really the Polar Jet Stream that is to blame, as the ridging in the extreme northwest causes the polar jet to go very far to the north..and what goes up must come down and it falls down the back side of the ridge with a vengeance, emptying the Arctic onto the fine people in the eastern two-thirds of the United States.
That has continued this spring and summer and has led to the coldest July on record for much of the Midwest (graphic below from Steven Goddard’s Blog)
That my friends, is a YO! Weather patterns are just that…patterns. They do similar things until some other force or factor changes atmospheric conditions. El Nino would do that and cut off the ridging and keep the Polar Jet in the Polar regions…but if El Nino doesn’t happen…or doesn’t happen until the spring, then all bets are off for a mild winter in the Midwest and Northeast. This information we received yesterday (from mdus.com) supports such modeling:
For you regular readers, you will remember that I have been very bullish 4Q14, mostly due to the above normal (to possibly well above normal) grain drying I expect to take place. I was also bearish on 1Q15, due to my thoughts on the El Nino prediction and what it has typically meant. I am no longer bearish 1Q15. I would NOT want to be short in January whatsoever. I also came across something today in my readings that suggests El Nino effects can vary depending on exactly where the warmer Pacific pockets of water are…there is an El Nino ‘Modoki’ effect, which is a Japanese term for ‘almost, but not quite’. This link shows you that the Modoki effect may be in play…which means the traditional El Nino that dominates all-weather patterns is not so tough and other weather patterns can persist.
The thought in our office is that 4Q14 is going to be a big mess all over again, similar to last year. Long lines at the terminals, terminal outages, possible allocation earlier in the season…and we’re beginning to think the actual winter may be another mess, too.
Here is the last graphic for the day which comes from Freese-Notis; the percentage of the corn crop by state that is now Good to Excellent…and it’s impressive!
Where before I have said do not be short 4Q14, I am now extending that thought to January 2015, at the least and maybe the first half of February. The memories from last year are fresh and still painful…mitigate your risks as much as possible. Start having discussions on alternative sources of supply.
For many of you, we are not yet set up to do business together. If that is the case, go back to the email I sent that brought you to this link and fill out the paperwork and get it into our offices so that we can help bring you supply from our vast array of supply points, which includes Scio, OH this winter, where it wasn’t really in play last winter.
I take great satisfaction in helping so many people last year arrive at supply point solutions that were never before in their sights, but still getting people the product to see them through the winter. It’s one of my favorite things about my job and I view it as a daily puzzle to solve. As the line from an old movie goes, ‘Help me to help you’. Filling out the application does not obligate you to do business with us…but it at least allows us the opportunity to act quickly if the time arises. That, and during the insanity of last January and February, we required all new customers (those who were sending in their credit apps at that time) to prepay 100% for the gallons, as did most everyone in the industry. That was not a total requirement for those who had established a line of credit prior to the stuff hitting the fan.
What can it hurt?
As always, thanks for reading.