Meanwhile, in the US grains continue to have a favorable outlook which dampens bullish prospects. I posted earlier about trend funds being net short grains like wheat and corn. My outlook still remains bullish longer term as an unusually cool summer can give rise to early frost.
But to be fair, this cool weather has given rise to government bureau predictions of ripe growing conditions for crops as hot weather tends to dry the plants. Also, the deflationary outlook continues to hover over the global economy and this can dampen demand for agricultural products because of a stronger dollar (e.g. increased risk aversion).
Australian Bureau: El Nino Developing In Pacific
Ocean conditions in the Pacific Basin suggest an El Nino event continues to develop, and should these conditions persist as predicted into spring, 2009 will be considered an El Nino year, the Australian government’s Bureau of Meteorology reported Wednesday.
Pacific Ocean surface temperatures, which drive El Nino events, currently exceed El Nino thresholds and are around 1 degree Celsius above average, while cloud patterns and rainfall along the equator are becoming consistent with a developing El Nino, it said in a regular review of climate indicators.
A large amount of the sub-surface water of the tropical Pacific is also warmer than the long-term average, particularly in the east, which is also consistent with an El Nino, the bureau reported.
“All international climate models predict the tropical Pacific to continue to warm and to be above El Nino thresholds throughout most of the second half of 2009,” the bureau reported.
“As all models surveyed agree El Nino conditions will persist, and as historically the southern winter is a time of good model predictability, the probability of El Nino conditions remaining through 2009 is high,” it added.
El Nino usually refers to the extensive warming of the central and eastern Pacific and cooling in the western Pacific. It generally leads to a major shift in weather patterns across the Pacific and in Australia and is usually but not always - associated with below-average rainfall in eastern and southern Australia, potentially withering winter crops such as wheat and barley.
But the bureau warned some current indicators run contrary to the “normal” development of an El Nino, which is usually associated with sustained strong negative values for the Bureau’s Southern Oscillation Index. The SOI has risen in recent weeks and is now strongly positive, standing at +12 in the 30 days ended July 20, up from a monthly value in June of -2 and up from - 12 at times in May and June, the bureau reported.
Source CME News For Tomorrow