Weather to dominate markets

first_imgShare Facebook Twitter Google + LinkedIn Pinterest Weather features will dominate U.S. grain markets for at least the next 60 days. Those weather features will be in both North America and South America. As the U.S. began the winter weather season last month, several items stood out. First, the Plains and the hard red winter wheat grown in that area went into dormancy among the latest dates in history. That late dormancy was a result of one of the warmest and driest record fall periods. The same dry and warm conditions seen in the U.S. Plains were also dominant in the Midwest. Harvest in Ohio took place with very few rain delays this fall. Second, the southern half of the U.S. will see relatively warm and dry conditions. It will bring concerns of potential winter kill for U.S. wheat if the winter lacks sufficient snow cover to protect the wheat plant. Third, the northern half of the U.S. will see colder than normal conditions. The central and eastern portions of the U.S. likely will see several bouts of transportation headaches compounded by colder than normal temperatures taking place at the same time as heavy snowfalls.What is different this year? The Polar Vortex that Ohio suddenly came to know several years ago is once again upon us. Digging further into weather patterns, the Polar Vortex can either be stable or unstable. The past two winters it was in a stable pattern. That pattern trapped the cold air from Siberia further north up into Canada, giving Ohio warmer than normal winters with snow amounts below normal. This year the nature of an unstable Polar Vortex will bring the cold air from Siberia further south into the U.S. bringing those cold weather patterns into the northern half of the U.S. This winter Ohio can expect two to three weeks of below normal temperatures followed by a warming pattern only to be repeated in a short period of time. Lather, rinse, repeat.Weather patterns from South America will greatly influence grain prices for the next three months. Last year a big reason for the corn and soybean rally from January to April was due to dry conditions in Argentina and southern Brazil. Northern Brazil at that same time was getting plenty of rainfall. Earlier this fall that pattern seemed like it could easily be repeated this year. Now with mid-December rains coming to Argentina along with forecasts calling for a normal rainfall pattern, that likelihood seems less certain. In addition, dry conditions seem to be becoming more pronounced in northern Brazil.For many weeks, U.S. soybean sales in October and November reached unheard of levels of 90 to 100 million bushels. Mid-December U.S. soybean sales were just 73 million bushels as soybean sales begin to see significantly more pressure from Brazil and Argentina. This shift in the origin of sales can produce price spikes and dips. It is not unusual for prices to move up and down, in a very choppy fashion — sometimes quickly and dramatically. What has been so unusual for the last several months has been the price rally in spite of record U.S. soybean production when so many had expected soybean prices to be much lower than they currently are. Many would call soybean prices overvalued. It has brought much excitement in November and December as producers have been anxious sellers of new crop 2017 soybeans with the November 2017 CBOT soybeans moving over the $10 mark.The reasons for price movement falling and rising can be broken down into two factors — demand and supply. When the market has focused on record U.S. soybean supply, prices have moved lower. Conversely when the focus shifts to record demand, prices have moved higher.China continues to focus on price and value when buying soybeans. Mid-December they bought at least 20 cargoes of U.S. soybeans in one week. This is in spite of the huge rally to the U.S. dollar since early November. Why the focus on U.S. soybeans? China’s currency is at several year lows, which has to be a huge factor.last_img

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