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“Being right half the time beats being half-right all the time.”
                                           Malcolm Stevenson Forbes

Commentary & Analysis
When it rains, will it pour?

I came across a great headline in Reuters today:

India struggles to perfect art of monsoon forecasting

I guess planning crops has become rather tough when you can’t predict whether a rainfall will bring 6 inches or 60 inches. Actually, I know nothing about the rainfall amounts of monsoons – I stopped trying to predict them long ago for obvious reasons.

But what I want to emphasize here is that weather has become increasingly important on the price of major US and global commodity prices.
After a monster day yesterday, wheat is up about 19% … just this week! Corn has rallied a respectable 10% as well. And all because of the weather …

In the US, near-freezing temperatures have threatened Midwest corn. Excessive rain has also meant planting delays. Flooding in southern states along the Mississippi River has impacted the plantings and transportation of grains.

In Europe, it is dry weather that’s hampering production of wheat. France is Europe’s biggest producer and exporter of wheat, and it was reported by Reuters this morning that some analysts think the current drought will cut 10% off of potential output.

This is the most recent news, but for weeks now concern has grown due to soybean and corn plantings being behind schedule. Now, as the ideal window for planting corn is closing, it is believed that only 60% of the crop has been planted; the number sits at an even lower 20% for soybeans.

No doubt the last 12 months have amounted to impressive rallies for the grains. And the bullishness due to tight supplies remains. But how will that gel with a broad commodities market sell-off, should one occur?

More and more analysts seem to be joining the concert of bears who think a major market top is in place, or at the very least believe a major reset is due. Without any surprisingly beneficial (read: bearish) weather developments, the kind that drive plantings and crops above expectations, the persistently tight fundamental outlook will probably allow grains to outperform other commodities in this environment.