Milling & Baking News - July 2, 2019 - 28

Weather Outlook

World weather impacting
markets, but for how long?
BY DREW LERNER

World weather anomalies have become
significant enough to finally have some
influence on commodity futures, but
how long will the excited marketplace
last? Flooding rain in the United States
induced the greatest impetus for upward moving corn and soybean prices
in recent weeks. India's weather has
had some influence as well along with
Australia, China and Canada. However, the world is a different place than
it was in 2008, which was the last time
that weather had a big role to play on
worldwide commodity markets.
Disbelief that the U.S. weather would
not trend better before the corn and soybean planting season was over delayed

significant drying. June came along
and, of course, only generated additional rain and prevented the wettest
areas from drying down.
Corn and soybean prevent planting
dates came and went, and the bottom
line is a record amount of acreage left
unplanted or abandoned that obviously shortens this year's crops quite
a bit. In addition to the reality of lost
acreage, there is still much speculation
about the future for U.S. crop production. Some forecasters are watching
for a developing drought while others are expecting more rain. The late
planting this year automatically puts
some of the U.S. crop at risk of frost
and freeze damage during September

60-day departure from normal
precipitation ended June 26, 2019

the onset of bullish trades this spring.
Once it became obvious that there was
dwindling hope for an adequate planting window in the U.S. Midwest Delta
and parts of the Plains the market finally
got some momentum.
The unprecedented rainfall of May
was the "coup de gras" that finally
put traders into motion. Many states
from Oklahoma to South Dakota and
east into Iowa and Illinois reported
either their wettest May on record
or one of the top 10 wettest, and that
occurred only after lengthy planting
delays because wet and cool weather
already had occurred in April. Flooding in May became very serious once
again, and the excessive moisture situation left much of the United States
in dire need of at least two weeks of
28 / July 2, 2019

Milling & Baking News

and October if the atmosphere cools
down a little too quickly.
World Weather, Inc. is finishing up
a study that actually shows favor for
normal to earlier-than-usual frost and
freeze dates this autumn. Once that
study is passed around there will be
a little more impetus for futures trade.
All of that excitement is based on
U.S. weather. There are other places
in the world dealing with anomalous
weather, including Canada, India,
parts of Europe and western Russia,
China and Australia. One of the few
places in the world experiencing mostly good weather is South America.
Heading the list of international
weather issues is India. The monsoon
began extremely poorly this summer.
Rainfall in the first half of June was

down 43% for the nation as a whole
with many areas reporting well-below-average amounts. The second
half of June brought some improved
rainfall to parts of the nation, but the
month was expected to finish out well
behind normal rainfall, but perhaps
not as dry as mid-June.
El Niño and its closely related
Southern Oscillation Index (S.O.I.)
were certainly not favoring India rainfall during June. Warm ocean water
in the central equatorial Pacific Ocean
was creating a Modoki El Niño environment and forcing the S.O.I. to
strongly negative values for much of
the month. When strongly negative
S.O.I. is present, India's rainfall is often suppressed, and that certainly has
been the case this summer.
The good news is that El Niño is
expected to gradually diminish in the
next few months, and as ocean temperature anomalies become less significant the S.O.I. will rise and El Niño
will diminish. Both changes should
help support greater rainfall in India,
and for that reason World Weather,
Inc. anticipates greater rainfall in July
and August. The changes will reduce
some of the market attraction to India's rainfall pattern, and speculation
over a possible poor summer rainfall pattern will begin to wane. India
weather is expected to gradually improve during the summer, but it may
not see ideal precipitation this year.
Australia is another place in the
world where El Niño has had at least a
hand in the jar of frustration over limited rainfall. Queensland and northern
New South Wales have not seen much
moisture of significance since prior
to the planting season for wheat and
barley. The region often is influenced
by the presence of El Niño, and that is
likely to be the case now. However, like
India, Australia's weather will improve
during the winter and early spring as
El Niño becomes a minimal event.
Western Australia is one of Australia's most important wheat, barley and
canola production areas. Colder-thanusual ocean water in the eastern Indian
Ocean likely created a poor rainfall
environment for Western Australia
during much of June and possibly
for a while in late May. Some areas in
Western Australia were dry or mostly
dry into mid-month before some rain
finally fell. Since then, rain has been occurring more routinely, and that is expected to translate into a more successful planting and establishment season.
Warming ocean water in the eastern
Indian Ocean will continue for a while
bakingbusiness.com / world-grain.com

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Milling & Baking News - July 2, 2019

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