By Dan Grant/RFD
MOUNT VERNON – Market analysts believe uncertain weather conditions this season, particularly if El Nino fades away, could create a “weather premium” as the trade shifts its focus to 2016 production.
“I’m more optimistic this year than many people,” Jody Lawrence, president of Strategic Trading Advisors in Franklin, Tenn., told farmers at the Winter Wheat Forum in Mount Vernon.
“The market is still sensitive to any weather or yield problems (this season),” he continued. “(The market) will rally due to any sort of problem the American farmer faces.”
Lawrence partially credits El Nino with moderate conditions and steady rainfall the past two seasons that helped farmers produce bin-buster yields.
In fact, since the U.S. average corn yield was below trend in 2002, yields were at or above trend for eight consecutive years, according to Darrel Good, University of Illinois Extension economist.
Both market analysts believe the possible shift of the weather pattern predicted this year as El Nino fades could cut into crop production.
“Yields typically fall as the weather pattern shifts (away from an El Nino),” Lawrence said. “I think very realistically we’ll see corn yields anywhere from 2 to 4 bushels lower than last year.”
If weather patterns are less conducive to crop production this year, Lawrence believes prices could surpass $4 per bushel for corn, $9 for beans and $5 for wheat.
Good agreed that a rapid shift in the weather pattern, particularly if El Nino transitions to La Nina, could trigger some weather premium in crop prices.
