Grains Update: Now Corn Is Reacting To The Cold?

| February 12, 2014 | 0 Comments

No doubt about it, the winter of 2014 has been a doozy…

As you may know firsthand, bitter temperatures have been a common occurrence in the Midwest and Eastern US over the past few months.  In fact, meteorologists say it was the coldest January in over a century.

And as I’ve mentioned in recent articles, the frigid weather is having an incredibly bullish effect on the price of natural gas.  In fact, the commodity recently tested multi-year highs at $5.50 mmBtu on lingering cold worries.

But natural gas isn’t the only commodity getting a bullish boost…

The brutal cold has frost levels at deeper than normal levels in many Northern US states.  As a result, corn is popping to 3-month highs at $4.41 a bushel on worries the Spring planting season will be delayed. 

In case you’re unaware, deep frost presents a problem when farmers are trying to get into the fields to plant a few months from now.  If the ground is still boggy due to thawing, the large tractors used for working the fields will get stuck. 

Add in the possibility of wet Spring weather and farmers may be kept out of their fields for quite some time.   If planting is delayed, it will put bullish price pressure on corn as farmers may elect to plant soybeans instead.  Obviously, such a situation will decrease the size of the 2014 corn crop.

What about wheat?

The essential grain is jumping on a downbeat USDA report suggesting winter wheat seedlings are succumbing to frigid temperatures.  What’s more, the lack of snow cover that usually protects seedlings from the cold is worsening the effects.

And that’s not all…

Meteorologists are also increasing the odds of an El Nino forming in the Pacific Ocean this year.  When this warm water phenomenon occurs, production in the world’s key wheat producing regions has a tendency to suffer. 

The combined effect of all the data pushed wheat from $5.50 a bushel on January 30th to $5.90 in yesterday’s trading session… a hefty 7% pop. 

Can wheat continue higher?

Given the amount of fundamental uncertainty presenting itself over the past few days, a bullish run above $6.00 a bushel seems likely.  You see, wheat was heavily shorted thanks to previously abundant global supply forecasts.  But now that supply worries are surfacing, bears are covering their short positions, adding to the bullish momentum.

Bottom line…

Grains have been in a decidedly bearish pattern over the past year.  But as is usually the case when commodities drop to multi-year lows, they’re prone to swift rallies when fundamentals suddenly become less bearish.

Until Next Time,

Justin Bennett

***Editor’s Note***  Subscribers to my flagship commodity investing service, the Commodity ETF Alert, recently established long positions in grains via carefully chosen commodity ETFs.  If you’d like to profit on further gains in grains, there’s still time to catch these trades before they rise above our maximum buy price! Click here to check it out!

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Category: Commodities

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.

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