Another choppy week in the Ag markets this week. This time the catalyst has not been political interference or distorted trade, but weather. Really cold weather.

The US was blasted by an arctic front that plunged an area from the Canadian border to Texas in subzero conditions.  Parts of Kansas recorded temps in the minus 30C for prolonged periods of time, with an average temp over three days of just -17C.  Areas as far south as the Gulf of Mexico is seeing citrus frozen on tree’s, water pipes bursting and an energy crisis because renewables and oil couldn’t be utilised.

Frost damage can be a tricky beast to determine, and it is obvious from watching price moves in wheat, that the market is having trouble calculating the damage.  In three days since the cold hit, we have seen the market lift 20¢/bu, only to fall 13¢ a day later, then record another 15¢/bu rally last night.   Speculative money is pouring back into wheat on the belief (prediction?) that a fair percentage of the wheat crop has been smoked.  Much of the northern areas of Kansas to the Dakota’s had adequate snow coverage to protect the crop from winter kill.  South of Kansas, snow coverage is spotty and the duration of the extreme cold has the potential to cause some damage.  Adding to the concern is that we are not going to have an answer until Spring when the crop breaks dormancy.

Estimates of the area that may have been affected range from 15-30% of the winter wheat area.  Within that area, the questions will continue to swirl of how much damage has been done.  Wheat is a tough plant and with a good spring, crops can compensate pretty well.  If damage is severe enough, US farmers may have the option to resow with corn or spring wheat.

Compounding the US hard freeze, Argentina is on track to record its 2nd driest season in 30 years and its northern neighbour Brazil is still suffering harvest delays due to wet weather.  With all this going on, the ag market doesn’t know which way to turn.

The week ahead….

Expect the whipsaw action to continue as the market grapples with weather induced uncertainties.

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Data sources: Reuters, Ag World Weather, NDSU, Mecardo

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