Wheat has continued to explode over the past week.  Our blog last week talked about the Spring wheat drought occurring in North Dakota.   The drought has worsened and crop conditions continue to fall.  Prices have risen another 50 cents per bushel since then.

Europe drought

A lack of rainfall in Europe is also getting some attention, bringing prices of the other wheat varieties besides spring wheat into the rally. The below normal rainfall in May has persisted into June.  Europe’s major wheat producers are France, Ukraine and Germany.  All three have areas of dryness developing.

Europe, drought, rainfall, wheat

What TCs can help forecast wheat drought?

We looked at one of the worst droughts Europe has faced.  In 2003, it was the devastating, deadly heatwave that dominated the headlines.  But the wheat production across Europe dropped due to the hot, dry conditions.  The teleconnection (TC) values during this period can give us a good indication what favors above normal temperatures and below normal rainfall.  Using Climatech, we examined the values of 2003 for June, July and August:

2003, heatwave, europe, wheat

So what do we see in all 3 months? A +TNA, +TSA, +AMO and others indicate a warm Atlantic was present. This can lead to an overall warmer Northern Hemisphere, as well as favor a +NAO (above normal geopotential heights over Europe).  Another observation from 2003 is a very warm DMI (warm Indian ocean temperatures off the east coast of Africa).  A +DMI can increase the strength of the West African Monsoon.  Greater ascent over North Africa can lead to increased descent over Europe–>higher temperatures and below normal rainfall.  This ‘analog’ technique is just another way to use Climatech in long-term forecasting.

Corn, soybean update

Corn and soybean prices have taken a “breather” recently.  Planting delays due to flooding are no longer an issue.  Now, the focus has flipped, with rainfall being viewed as beneficial. There are currently some dry spots, especially in the northern grain belt.  Despite poor initial crop conditions, more moisture for the crops would prevent major crop issues.  For now, weather forecasts are positive, with the west coast ridge retrogressing in the next 5- 8 days. The question is whether or not ample rainfall will continue.

soybeans, grain,

IMAGE SOURCE: TROPICALTIDBITS.COM

“There will be huge trading opportunities this summer in grains on weather and we understand the psychology of the market, but only for paying customers”–Jim Roemer