The Last 2016 Outlook from WeatherTrends360 - Bears are Dancing!
Jun 23, 2016
This will be our last blog on AgWeb.
For 15 years Weather Trends International has been able to identify "black swan" events (for the trolls out there we're not talking about a bird) a year before they happen where weather plays a role in that business sector (retail, supply, Wall Street and now Agriculture). At least 1.2 million folks that watched our Seeds of Success video series know we forecast a year ahead the record warm El Nino winter, one major blizzard, record warm March, floods in Argentina, drought/heat in Brazil, Safrina crop yields forecast by wt360 to be off 15%, freezes in May, very active hurricane season, droughts to floods in India/Australia and of course a scorching hot/dry Summer in the U.S. with the potential for $6 corn (Dec futures contract) in late July - August. As we like to say, God gave us all brains and we used ours to invent a math, statistical 24 climate cycle approach to predicting the weather (temp, GDDs, rain, snow) about 27 years ago as opposed to physics based/fluid dynamics weather modeling used by most in our industry that struggles with a week 2 outlook. We've proven ours is a better way when it comes to year-ahead forecasting for weather sensitive industries. Enough said...let's dive into your last outlook...farmer clients know where to reach us.
So where are we as of 23 June 2016? Not too far off what happened in June 2012 - the trends are actually very similar both in the U.S. and abroad. Not to pick on the USDA again but lets look at their 17 June 2012 assessment and recent 19 June 2016 assessment. Back then 9% of the corn crop was poor to very poor, this year 4% poor to very poor - pretty close at this early stage in the season which tells you NOTHING about the end game in 3 months. But just two months later the very poor/poor conditions surged to 52% in the 28 August 2012 report. wt360 predicted this in October 2011. Without an accurate long range forecast there is no way for the industry to know that we're headed for...at least 35% poor/very poor or more come 28 August 2016 (another prediction for you). No way to know that like Brazil, yields will be off 8% to 13% YOY this year in the U.S. No way to know that the hot/dry trends in June will get worse in July and August with the 2nd hottest Summer in 28 years and 4th driest. No way to know that Corn prices will surge again to near 4-year highs in 30 to 45 days. We do...and we'll come back on 1 September to do a recap either way. Until then enjoy this last bit of free intel. CLICK FOR LARGER IMAGE
While the USDA admitted in their report this past Sunday that "drought-like conditions exist" in many areas of the corn belt their overall positive report, just like the pretty positive reports in May and June 2012 in part sent the commodity markets crashing this week. Margin call requirements for funds that play with metals may have been the bigger issue here - topic for another day. However, it would have been nice if the USDA actually elaborated on the weather just a bit more as the June weather trends are more than just a bit alarming and they were not cold per NOAA's June outlook. Funny how normally an anomalous weather event would get the government in a clamor to blame Global Warming but with the June hot/dry conditions for many they were radio silent. hmmmmmm???
Here are the weather trends for the first 23 days of actual weather and 7 more days of forecast weather for June comparing 2016 to 2012 - should be a warning to all farmers that we're seeing the start of a drought and scorching heat this Summer which technically started this past Monday at 6:34pm EDT....weather types say Summer starts with June 1 so we're off to the #1 hottest June...aka Summer in 121 years and 2nd driest in at least 25 years June-to-date for the U.S. overall. CLICK FOR LARGER IMAGE
For the Corn Belt only, the trends look like this for the first 23 days of June actuals and 7 days of short range forecast - Hottest in 28 years, most hot 90F days in 22 years, yes more than 2012 and the 3rd driest in 25 years, not too far off 2012's pace. CLICK FOR LARGER IMAGE
Here are some locations around the major row crop growing regions which shows a lot of areas are suffering from very hot/dry weather indicating that another couple heat-waves will prove to be very detrimental to yields - reason we see 8% to 13% lower than expected yields...not 169 bu/ac per USDA but low 150s or lower! Obviously not as bad as the 123 bu/ac in 2012 but who knows how low we go. Just about everyone knows at this point that anything much less than 160 and the markets are going to react big time...again we've said PROACTIVE vs REACTIVE since I was a Capt in the USAF 27 years ago so that's our only objective in helping farmers. Yes some areas are getting above average rainfall (consider yourself lucky), but a bigger majority are not. The overall pattern of the hottest June on record and 2nd driest in 28 years for the U.S. overall. CLICK FOR LARGER IMAGE
We've had a great run of 5-0 on predicting the top/bottom each year on the Corn price from 2011 to 2015 so 2016 will be another big test...we like our chances...a lot! We made a killing and helped many farmers and Fortune 500 clients over the years while thousands of hedge funds went out of business since they were REACTIVE not PROACTIVE. Green in the chart below is our peak or bottom year-ahead corn price projection, red is what happened. CLICK FOR LARGER IMAGE
So what lies ahead - we've only harped on this for almost a year now but here's a reminder for those that didn't watch our Seeds of Success video series (1.2 million folks did). Summer temperatures (June - August) will be the 2nd hottest in 28 years in the Corn Belt, almost a mathematical certainty. CLICK FOR LARGER IMAGE
Rainfall will be convective in nature meaning some areas will be spared a drought, but many will not. Again, we're only knocking off 13% off yields here but in light of Brazil's 15% loss...SCOTTY WE HAVE A BIG PROBLEM. CLICK FOR LARGER IMAGE
July will be critical with seasonably warm/dry start for the NW Corn Belt but very hot mid to late month thorough August. But recall that it was just 3 weeks in April of hot/dry weather in Brazil that caused their crops to lose 15% off yields...the same is slated for the U.S. Corn Belt only much longer heat and dry weather. Heat during silking-pollination kills yields as most know, lack of rain is a secondary negative for Kernel set and maturity. Not since 1995 has both the U.S. and Brazil had bad crop years together so if you thought the rally and sell off in June was volatile...wait until you see late July-August! At least that volatility will be steadily upwards! Hint...never in 121 years have there been 4 straight cold Summers in the Corn Belt -only one interesting tid-bit FROM our 7 million lines of code tells us about the Summer. CLICK FOR LARGER IMAGE
God Bless the Farmer...we pray nightly for you! :)
- Capt Kirk out spending some time with my wife and 5 month old daughter.