Thursday, April 23, 2009

The Debts of the Spenders: Too Much Rain Over Paradise (and not enough in others) - ENSO Conditions Turn Mostly Wet

North Dakota has yet to plant any wheat, according to the U.S. Department
of Agriculture. The average for this time of year is 12% planted, and the state had
planted 14% last year. The USDA said 6% of the total U.S. spring wheat crop was
planted as of April 20, up from 2% last week, but well behind the 21% average.

Source: Commodity News for Tomorrow by CME- DJ Newswire]

Ag trading has traditionally been dominated by weather concerns. Only in recent years has volume and speculation picked up. The formerly sleepy grains and softs pits are now more influenced by greater macro-economic trends such as currency fluctuations and spillover effects from equities.

In these times it's good to go back to the basics.

ENSO, or El Nino Southern Oscillation, refers to the weather phenomenon of the El Nino/La Nina cycle of the tropical Pacific Ocean. ENSO has the potential to disrupt the regular weather patterns in Asia, South America, Central America, and North America.

I am focusing on North America since that is where a large bulk of grains are concentrated (the others being Brazil and Argentina).

The consensus among satellite forecasts and climatologists is that we are entering an ENSO neutral phase of the year w/La Nina ending and El Nino beginning. [Edit: But w/a wet bias.] meaning more rain. And too much rain can delay the planting season.

It is also interesting to note that central and southern California as well as Georgia are beginning to show signs of drought risk. This is in stark contrast to other zones. Overall a bullish tone for ag bulls on the weather front for the next 2 months.


For those who miss the 1990's:



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