Earlier this week, NASA observed a massive sunspot grow to 6 times the diameter of the Earth! Why should anyone other than space-loving nerds care? Because these are directly linked to solar flares which affect our atmosphere and climate. If you missed my earlier post on Sunspots and their 11 year cycle, you can check it out here.
Huge Sunspot (Source: NASA/SDO/AIA/HMI/GODDARD SPACE FLIGHT CENTER)
This means we should expect another hot, dry summer this year (and possibly in 2014 as well). Last summer, droughts across the globe wreaked havoc on crops, crushing supply and sending prices skyrocketing higher. As we enter the spring planting season for a lot of crops, most farmers are saying they will be planting record amounts (especially corn) in hopes of cashing-in on the above average prices. This has lead nearly everyone from the USDA to industry associations to predict lower prices later this year on record supplies and recovering stockpiles.
The main problem that I see is that all of these predictions assume yields per acre to be in line with long-term averages. I think people are simply looking at things on the surface while overlooking two major factors:
- In most areas, the soil is still very dry from last year’s drought. Professor Randall Miles from the University of Missouri is saying it could take up to two years before soil in the Midwest recovers to normal moisture levels: “In order for the soil moisture to return to a normal state this year, the rain and snow would almost have to come continuously… The weather would almost have to be like the precipitation found in London, coming down light and slowly to minimize runoff… I believe it could take two to three years before farmers can expect bumper crops again.”
- We’re not supposed to hit the peak in the number of Sunspots until 2014! This means we can expect more solar flares and hot, dry temperatures – not the above normal rain needed to replenish soil, which would only exacerbate the problem!
In my view, the conditions point to another tough year for farmers. However, production across the globe is expected to increase quite a bit because of higher prices. If we do get normal rainfall or if other nations fare better on conditions, prices will come down on increased stockpiles, but I doubt they’ll fall as much as most are predicting. Too many things point to higher food prices in the long haul. If we do see any weakness in prices this spring, I’ll be using it to increase long-term positions.
Thanks for following!
Nick
P.S. I guess I’m sort of a space nerd. I find this stuff fascinating!