One of my favorite things related to the ‘territory’ NGL lets me cover is that I get to talk to retail owners and managers from Florida, to Ohio to Iowa and all parts in between. I’m the only rep in our company who markets on all of the major pipelines so I get to speak to a wide variety of people and I respect their opinions.
I am going to share a recent opinion with you, from a conversation I had with a client via email late last night. We were talking about rains and corn crop ratings in Iowa and I asked him how the current corn rating (which is very good) compares to any predictive models for yield and timing of harvest.
Here is a some of what he shared with me:
“I don’t usually try and determine yield off numbers this early in the game. With that being said, if I were to pick an analog year, 1994 would be my prediction. My personal opinion is barring another drought, flood or unforeseen disaster, this crop will surpass any we’ve seen in the last 3 – 8 years. Yields will jump due to test weight. Moisture will be higher than normal even though corn harvest will be delayed due to bean harvest. I don’t think real corn harvest will start until October. If I’m right, elevators won’t be able to keep up and will pile grain. This will take drying season straight into home heat season.”
Now, we all know it’s early and the person I spoke with reiterated that. However this individual has a perspective I value given his time in grains background. It also aligns with the thoughts I have held since the winter when I began to buy into this year being El Nino influenced.
I think we’re headed for a large, large grain harvest…and if we do experience an El Nino summer and fall, that means ample to more than desired moisture…and an increased likelihood of a wet crop.
I remain bullish for the 4th Quarter of 2014. I would want to be long there. I think some folks will wind up chewing up some of their home heating contracts as they had to use them during dryer season, similar to last year. That will create hand to mouth demand in December and January regardless of if we have a cold winter or not. If we see that, we’re talking wet barrel demand and wet barrel premiums, something our company is expecting and planning for already.
I am not saying we will see the severity of price spikes like we did last year; I’d wager against that. But we will see higher prices than what you can buy 4Q14 for right now, of that I am convinced. Be sure whatever you buy there, you have the optionality to roll gallons into 1Q15. I’d still lean away from getting too long in 1Q15 given my belief in the El Nino influence this winter, which tends to cut off ridging systems like we saw last winter as we were under the influence of the Alaskan Block (or Ridge) pattern (see here for my blog on that this past winter.
In case you missed it, here is what an El Nino corn crop looks like..the last El Nino was the harvest of 2009…a big one.
DON’T BE SHORT 4Q2014!