Weather and Commodity Trading

World sugar futures open lower

2007-08-10T11:39:50-04:00

World Sugar futures continue to slide as more good news on the supply side continues to support strong numbers in Brazil, India and Thailand. Weather has been favorable in these origins, and the outlook over the next two weeks is positive for developing cane. Centre-South Brazil will have small but steadily increasing weekly rainfall totals over the next two weeks, helping next year's crop while not significantly interfering with current crop harvest. After a brief break, widespread Monsoon rains in India will return by early next week, maintaining the favorable pattern experienced so far in 2007, and the moisture laden front that moved out of India will bring steady precipitation to the Thai crop through next week. From a weather perspective, this outlook is certainly bearish for October '07 and March '08 #11 futures.

USDA crop report - August 10

2007-08-10T10:31:12-04:00

The National Agricultural Statistics Service (NASS, of USDA) issued their Crop Production report this morning, and it should be NO SURPRISE to those reading the Weather Trends discussions that corn production and yield expectations are up, and soybean and cotton expectations are down vs. last year. While final numbers will surely vary, NASS estimates that corn production will be 13.1 billion bushels, which is 24% higher than the 2006 crop. Their yield expectations are for an average yield of 152.8 bushels/acre, which is 3.7 bu ac more than 2006. The large increase in planted acres combined with favorable weather account for this. The increase in corn acres obviously took away from soybean acres, as 2007 soybean production is estimated at 2.63 billion bushels, which is an 18% decrease from last year. Yield expectations are at 41.5 bu ac, down 1.2 bu ac from 2006. Finally, cotton production is estimated at 17.3 million bales, which is down from 21.6 mln bales last year; yield expectations are at 783 pounds/acre, vs. 814 in 2006. Of the four major growing states, AR, GA and MS all are showing a significant decrease in overall production; TX is the only major state with an expected production increase vs. last year.

Weather drives coffee futures down

2007-08-07T14:34:15-04:00

Over the last week, there has been a lot of market chatter concerning potential frost and subsequent damage to the Brazil coffee crop. Within one week, coffee for Sepember delivery went from below 1.13 last Wednesday to 1.19 on Monday, and are now trading around the 1.17 mark on the NYBOT. Weather Trends International expects the next two weeks to resume a normal pattern throughout Minas Gerias and Sao Paulo states, with the only real cold air affecting the south towards Rio Grande du Sol, which is outside of the central coffee growing region. Overnight lows in the coffee growing states will be in the mid 50s. Prices may not slide much further however, as the global S-D situation is pointing towards some tightness later in the year.

2007 Hurricane Season Update

2007-08-03T13:15:24-04:00

This morning, the Hurricane forecasting team at Colorado State University (Bill Gray) officially reduced their numbers for tropical storms in the Atlantic Basin for the 2007 season. The CSU group is now calling for 15 tropical storms, 8 hurricanes and 4 major hurricanes. This is down from their May 31 forecast, which was calling for 17, 9 and 5 respectively. While the 2007 season is far from over, there are a few major reasons for the decreased activity. Dust storms, which can be hurricane suppressors, have been visible from satellite imagery moving across the Atlantic into the Caribbean and are more prevalent than what many had expected at the onset of the 2007 season. Further, earlier in the year forecasters at NASA (among others) were calling for a strong La Nina to develop which would be conducive for tropical system formation; that hasn't happened as we have seen relatively neutral conditions along the equatorial Pacific Ocean. A final factor is that SSTs in the Atlantic Ocean have not been warm enough for an extremely active season to develop. Weather Trends International is keeping our total named storm numbers unchanged at 12-13.

NASS Survey Indicates Healthy Crop Conditions through July

2007-08-02T10:08:21-04:00

The most recent crop progress report released by the National Agriculture Statistics Service (NASS) indicates that many crops are in good condition as of late July. For the week ending on July 29th, NASS indicates that all surveyed crops had higher percentages of good and excellent ratings as compared to conditions for the same week in the 2006 growing season. In addition, all crops had lower percentages of poor or very poor ratings vs. last year. The most notable news in this survey comes from the favorable surveys in the corn and soybean states. Many forecasters have been discussing poor outlooks and widespread crop problems in both the eastern and western corn/soy belts this year, and this has been reflected in the market by the volatility in corn and soy futures. Despite the market uncertainty, Weather Trends International has been optimistic about the growing conditions for both corn and soybeans all season. Further, our view is that favorable crop conditions will remain through harvest, and the 2007 crops will finish with very strong corn and soy yields. It is important to note that these surveys are considered to be a representative sample of the general growing conditions for each crop. As such, with any sample population, there will obviously be conditions that do not fit into this distribution. However, the overall outlook at this stage in the growing season supports the favorable view that Weather Trends has been discussing.

Centre-South Harvest 40% Complete

2007-08-01T10:44:25-04:00

Following last week's rain in Brazil's primary sugar region, the return to a drier seasonal pattern in the Centre-South, is allowing growers to resume their normal harvest of sugarcane. According to UNICA, the Centre-South harvest of the 2006/07 crop is now 40% complete. A little moisture throughout the C-S should be expected over the weekend, but the overall pattern for the next week should be very favorable for harvesting operations. In India, Monsoon rains will be more evenly distributed over both the northern and southern growing areas for the next few days; the favorable weather will continue to strengthen India's position as a solid net sugar exporter, further supporting bearish fundamentals in World sugar prices.

Biofuel Demand Continues to Support High Food Prices

2007-07-31T11:20:36-04:00

The ongoing demand for biofuel production continues to spillover into the prices we pay for food. Despite larger US planted acres and generally favorable weather in the corn belt this year, increased demand for energy alternatives both domestically and abroad have diverted some of these acres away from food and associated industries. Higher corn prices translate to higher feed prices, which are reflected at the consumer level by price increases seen in milk and cheese, beef, poultry and grains based products. The World Bank food price index estimates that the basket of basic food commodities (including grains, dairy, sugar, meat, poultry, etc.) is currently 21% higher than it was in 2005. The June 2007 estimates by the Federal Government's Bureau of Labor and Statistics calculated an 0.5% increase in food prices vs. the prior month, and this was the 6th consecutive month where the food index exhibited an increase (the June energy index decreased vs. May). Further, for the first half of the year, the food index increased 6.2%, and contruibuted to approximately 17% of the total Consumer Price Index for this period.

Quiet Weather for Energy Futures

2007-07-30T13:08:20-04:00

The weather piece in the energy price puzzle continues to point to a bearish scenario for the remainder of the summer in the US. July temperatures were normal to below normal in all major demand regions including Houston, Chicago and New York. The Weather Trends International outlook for August further supports the continuation of this pattern of cooler temperatures over much of the country. There is still plenty of time left in hurricane season to cause some disruptions, but the season has been extremely quiet so far, and plentiful gas supplies combined with the lower prospect of extreme weather should support the fundamentally bearish picture in natural gas markets. The current satellite image of the Atlantic Basin is not showing anything threatening at the moment.

Rangebound World Sugar

2007-07-30T12:19:32-04:00

Last week�??s rains in Brazil�??s Centre-South provided a nice boost for cane to be included in next year�??s harvest. Many fields from Campinas through western Sao Paulo state through Curtiba (Parana) received 2 to 3 inches of precipitation last week, helping the developing cane through the seasonal dry period. While current crop (06/07 crop year) harvest was slowed due to the rains, this week will transition to a drier pattern by mid week, and harvest should resume to normal; the next 2 weeks look to remain normal to dry. Indian Monsoon activity was mixed last week with the southern belt receiving plentiful rains, while the northern belt was somewhat light. This week shows strong convection returning to cover much of the northern belt (both Eastern and Western U.P) and the overall pattern continues to be favorable for a healthy crop. No significant market news as October Sugar (NYBOT) opened today�??s session trading slightly above Friday�??s close of 9.98, reaching 10.12 before briefly dropping back below the 10 cent mark. Traders are likely to be somewhat neutral early in the week as they await this afternoon�??s NASS crop condition report to see if any grains news triggers a move in sugar.

Expect Another Volatile Week for US Grains

2007-07-30T11:20:35-04:00

While corn and soy futures started last week off on a bearish note, trader sentiment quickly changed as short term models pointed to more heat building up in the Central and Southern Plains states. As it turns out, this didn�??t verify, but the market still closed strong at the end of the week. The upcoming week looks to be a favorable week for both corn and soybeans, as some warmer conditions will be welcome following the cooler trend that has dominated the pattern for the last few weeks. However, the warmth will be partially offset by some lower rainfall totals; this factor will likely dictate trader behavior early in the week. Overall, we believe that the bullish bias that has been driving traders activity over the last few sessions is unfounded, as most crops are still in generally good condition. Even though the last NASS crop conditions report 'downgraded' crop conditions from 64% to 62% and 62% to 61% for corn and soybeans respectively (this reflects Good or Excellent crop ratings) vs. the prior week's report, the fact remains that 2007 has still been a favorable weather year for corn/soy in the major states, with crop conditions still looking positive through harvest. Increased demand will likely be a more significant driver than a supply shortfall resulting from poor weather.