Corn Rises as Decaying El Nino Pattern Boosts U.S. Drought Odds
By Jeff Wilson
April 16 (Bloomberg) -- Corn rose, capping the biggest weekly gain in two months, on speculation that cooling Pacific Ocean waters will boost the odds for a drought in the U.S. Midwest, reducing yields in the country’s biggest crop.
Some meteorologists were predicting that an El Nino weather pattern, which involves warming equatorial Pacific waters, would bring excess rain. Instead, the pattern is weakening, increasing the chance of drought in North America to about 20 percent, from 17 percent in a normal year, said Elwynn Taylor, an agricultural meteorologist at Iowa State University in Ames.
“Some traders are starting to bet on a hot, dry weather pattern this summer,” said Jerry Gidel, a market analyst for North American Risk Management Services Inc. in Chicago. “There’s increased speculation the El Nino will die quickly this year,” increasing the odds for damaging weather when corn is maturing in July, Gidel said.
Corn futures for July delivery rose 0.25 cent to $3.74 a bushel on the Chicago Board of Trade, capping a weekly gain of 4.7 percent, the most since Feb. 12.
Southern Oscillation Index
The 90-day average Southern Oscillation Index for barometric pressure in the Pacific Ocean at points along the Equator dropped to a negative 8.61 today, from negative 13.43 on March 17, according to data from the Queensland Department of Environmental and Resource Management in Australia.
The drop in the index and the weather patterns in the past six months are similar to what occurred in 1982-1983, when drought quickly developed in the Midwest in May and June, Iowa State’s Taylor said. Corn yields tumbled 28 percent in 1983 from a year earlier and soybean yields dropped 17 percent.
“It’s a terrific shift in the SOI Index the past month,” signaling the potential for a repeat of 1983, should the index continue to fall in the next 30 days as summer weather patterns are established, Taylor said.
“It’s not a big increase in the drought potential, but that could change in the next 15 days,” if the index falls rapidly, Taylor said.
Corn has dropped 9.8 percent this year on forecasts for bigger crops in Brazil and Argentina, the leading exporters behind the U.S.
Corn is the biggest U.S. crop, valued at $48.6 billion in 2009, government figures show.
To contact the reporter on this story: Jeff Wilson in Chicago atjwilson29@bloomberg.net
Last Updated: April 16, 2010 17:59 EDT
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