All Things Considered – March 2012
Jim KnisleyFeatures Nutrition and Feed Research Environment Production Sustainability
Uncertainty Is an Enemy
If anyone would like a large, tractor tire – including rim – I’ve got one. The problem is I don’t own a tractor and the tire and rim are sitting atop a 10-foot concrete breakwater. They were delivered by Lake Erie during a windstorm that submerged 25 feet of beach and sent waves over the concrete barrier.
But that wasn’t the weirdest part. The really strange thing was watching it snow “up.” Presumably the snow began in the clouds (there was none on the ground), fell for a while, but as it approached the ground the wind drove it up.
This is just the latest in a series of weird weather days in Canada’s banana belt, where I now live. A couple of days earlier we had Aprilish temperatures and driving rain, and a couple of days before that I was out hitting golf balls.
Last winter we were buried. The road that takes me into town was imitating a tunnel with huge snowdrifts on each side. The lake was frozen as far as the eye could see.
And this area is far from exceptional. When it comes to weirdness we aren’t even in the top 10.
Take for example, Regina, where I used to live. In mid-January bitterly cold air -40ish temperatures combined with westerly winds to produce wind chills approaching -50. At that temperature, frostbite on exposed flesh can happen in less than 10 minutes. This deep freeze followed bouts of unseasonably or perhaps unreasonably warm weather.
Meanwhile, a town in Alaska was dealing with 20 feet of snow, Seattle faced snowmaggedon and ski slopes in the eastern United States were bare.
All of this uncertainty, according to the experts, is partly due to La Niña and partly due to the Arctic and North Atlantic Oscillations.
La Niña has helped push the jet stream north, near the Canada-U.S. border and funnelled dry air across much of North America.
Meanwhile, the Arctic Oscillation and the North Atlantic Oscillation are strong this year, unlike last year when they were weak, which results in a steady west to east flow of that drier air.
But the end may be near as the two oscillations and La Niña may be weakening. The result could be a dry early winter followed by a wet late winter and spring. But who knows?
Meanwhile, some may be heartened to hear that global warming may not be playing a role in any of this. But, then again, it might.
The Intergovernmental Panel on Climate Change (IPCC) warned in a report that climate change would make extreme weather more common, and more extreme, in coming decades.
It is “virtually certain” that the 21st century will see an increase in the frequency and magnitude of warm temperature extremes and a decrease in cold extremes, according to the IPCC.
They also expect that climate change will affect precipitation patterns in many regions.
But in the near term or the immediate future uncertainty is the operative word.
For grain farmers or those, like poultry farmers, who depend upon grain production uncertainty is an enemy.
Uncertainty makes it particularly hard to plan and adds some punch to the old catchphrase “if you fail to plan, you plan to fail.”
A result of the uncertainty is volatility and we’re seeing that in spades. In recent weeks, grain and oilseed prices have fallen. There is more available than earlier thought and consumption has slipped.
The general expectation is that this will continue into next crop year and that prices will drift. Just the other day corn prices in Chicago went limit down.
Meanwhile, wheat and, to a lesser extent, sugar have become corn by other names. Lower-quality wheat supplies are more than adequate in North America and internationally and this has led to soft prices and the substitution of wheat for corn in some feed rations. Meanwhile, sugar is being used instead of corn sweeteners in some cases. In both instances this has somewhat softened demand for corn.
But corn supplies remain historically tight and prices, despite recent weakness, remain above long-term averages. All of this sets the stage for a potential weather market and the possibility for extreme weirdness.
Some of this has already shown up. The Ukraine, for example, has been exceptionally dry and the winter wheat crop is said to be in trouble. Meanwhile, Australia may be headed for a bumper crop.
But the key will be the U.S. plains. Decent or “normal” weather would mean tight but adequate supplies of corn and soybeans. But grain markets look like they will be easily spooked. If it doesn’t rain in Des Moines for a couple of weeks this summer expect prices to jump. If it rains too much this spring expect prices to rise. If the Canadian Prairies have another wet year and it looks like a lot of feed wheat is coming in the fall, expect it to affect corn prices.
The bottom line is that if the weather is weird, expect feed grain prices to be just as weird.
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