Grain thoughts Friday
4 responses | 0 likes
Started by metmike - May 18, 2018, 11:30 a.m.

What's interesting today, is that I think the real threat..........and why the market is up this much, is the widespread heat and rain shutting down coming up at the end of week 2.


Excessive  rains near term in the WCB.C/Plains may be more bullish corn/bearish beans but the heat ridge longer term is bullish everything...........potentially. 


Here are my thoughts on this:

1. A heat ridge is only bearish if planting is very far behind the average. A few weeks ago, that was the case but we are probably a bit ahead now in corn and beans well ahead of average.

2. A heat ridge "can" be bearish if it lasts only a few days and conditions have been too wet. 

3. A heat ridge later in the growing season does not matter as much if there is a ton of rain coming up before it arrives. Short term rains with high confidence count much more than a speculative heat ridge in week 2, since the short term rains are "making" the crop. "1 bird in hand is worth more than 2 in the bush." 


1. The earlier in the growing season, the more powerful the price reaction can be to a speculative heat ridge. A heat ridge that starts in June, when the crop is just getting started has the potential to do waaay more damage if it defines the Summer pattern.......a 1983 type "dome of death" can kill the crop if it starts in June.   However, a heat ridge that starts at the end of July and continues, will cut yields, especially for beans(August weather critical) but not kill the crop. 


2. The market has already dialed in lots of risk premium into the price before the growing season. If we have average weather and yields.......all things being equal the price usually drops as weather risk premium comes out as the crop is made.

3. A heat ridge early on that could define Summer justifies ramping up the risk premium. The market will start trading worst case scenario's. Speculative buying is maximized at this time frame. The earlier in the season, the more powerful an extended forecast dome of death has to spike prices higher...........even  in the face of alot of near term rains.  Instead of 1 bird in hand worth more than 2 in the bush, the bird in hand is worth just a fraction of the 10 birds in the bush(the entire growing season ahead)

Comments
By silverspiker - May 18, 2018, 1:29 p.m.
Like Reply

A B C    1 2 3     


2 + 2 = 4... ABC easy as 123

By metmike - May 18, 2018, 4:44 p.m.
Like Reply

silverspiker,

I didn't know that you were such a big Jackson 5 fan:


https://www.youtube.com/watch?v=M-aSjHnbw18





By metmike - May 18, 2018, 4:50 p.m.
Like Reply

The week 2 forecast guidance is getting interesting.

Note the heat ridge backing up a bit. The Southeast will shift to having a weak trough vs a heat ridge. This is very important.

A heat ridge in the Southeast, pumps in warm humid air into the Midwest and will be causing all the rain in the next week with jet stream and front dynamics interacting with the moisture in the midsection of the country.

However, take away the strength of that moisture pump with its southerly winds blowing deep moisture from the Gulf of Mexico well into the Midwest and replace it with a trough, that has the opposite effect............suppressing moisture/confining it to closer proximaty to the Gulf because winds on the back side of the trough will be towards the south, not from the south...........so air masses will be drier and of more of a continental origin as you get farther north from the GOM.

As a result, the 8-14 day forecast is dialing in some dryness now, with the heat centered a bit farther northwest than it has been:

Precipitation Probability

  8 to 14 Day Outlook - Precipitation Probability


8 to 14 Day Outlook - Temperature Probability

By metmike - May 18, 2018, 5:02 p.m.
Like Reply

The experimental week 3 and week 4 weather forecast continues the late week 2 pattern, backing the heat ridge farther west and having a weak upper level trough in the Southeast US:

http://www.cpc.ncep.noaa.gov/products/predictions/WK34/


    


Week 3-4 Outlooks     
Valid: 02 Jun 2018 to 15 Jun 2018
Updated: 18 May 2018

Please provide comments using the online survey.

Temperature Probability


Week 3-4 Outlooks - Temperature Probability
Precipitation Probability
(Experimental)


 Week 3-4 Outlooks - Precipitation Probability