Milling & Baking News - October 6, 2020 - 24

Weather Outlook

Solar cycle may signal long-term
increase in wheat prices
BY DREW LERNER

Weather conditions are always varying in key agricultural areas around
the world, and this year has certainly
not been an exception. Some areas
that had been suffering from drought
in 2020 recently have received rain,
and some of the previously wet areas
are seeing an increased need for rain.
Trying to predict future supply
and demand for agricultural commodities that are always vulnerable to weather changes can be a big
challenge, and the same can be said
of futures prices. There is a longterm association between wheat
prices and the solar cycle, and based

Most economists would tell you
without hesitation that wheat prices, like most agriculture commodities, will become more valuable as
the human population expands and
extreme weather continues. That is
a no brainer. However, those prices
are not likely to move in a straight
line, which makes the prediction of
future weather extremely important
in determining supply and demand
as well as futures prices. So, tell us
something we do not already know,
you say? Okay how about this...
Despite all of the extremes seen
in weather events in recent years,
weather is cyclical. The atmospheric

on that relationship over the past 60
years there is reason to believe the
price trend is upward.
Drought in 2019-20 had an impact
on small grain production in Europe, Ukraine, portions of southern
Russia, Kazakhstan and Argentina.
Some of the dryness in Europe and
Ukraine has begun to ease recently
while dryness has been expanding
in the US Plains. Portions of Argentina also have received significant
rain recently, and the prospects for
Australia wheat and barley are looking quite fine. India and China will
not be left out of the good overall
weather picture for the coming winter season. With all of that said the
big question of the day is, 'Where are
wheat prices going from here?' Will
the world surplus continue or will a
shortage of small grains lead to higher prices over the next few years?

patterns seen today have been seen
before and they will occur again.
The problem with weather forecasting is that there is not just one
pattern dictating the weather, but a
multitude of elements play a part in
determining what the weather has
been and what it is going to be.
This winter will be dominated by
a weather pattern promoting more
gyrations of warm and cool weather
around the Northern Hemisphere.
This will contrast greatly with last
winter 's more docile pattern.
In addition to the more gyrating
ridges and troughs of high and low
pressure scattered around the hemisphere there is an aggressive La Niña
underway. La Niña events tend to
occur randomly, like El Niño events,
but there are certain times when La
Niña events are more likely to occur
than other times, and one of those

24 / October 6, 2020

Milling & Baking News

times is over the next few years. La
Niña events often are favored during the period midway between the
solar minimum and the solar maximum of sunspot activity. La Niña
events tend to remove moisture
from the middle latitudes of planet
earth while increasing moisture in
the tropics and subtropics. This process results in more dryness and/
or droughts in the middle latitudes
and higher futures prices for wheat.
Droughts tend to occur more often
during La Niña events that prevail
over more than one year, and two of
the favored areas for such dryness
are in the United States and in Russia. There are other anomalies associated with La Niña, like too much
rain in some of the tropical areas of
the world, abundant rain in South
Africa during the summer and similar conditions in eastern Australia
during their summer.
The close relationship between
La Niña events, El Niño events and
other repeating atmospheric patterns is what determines our weather from one season to the next. Since
the solar cycle is probably one of the
greatest driving forces of Earth's
weather, it can basically dictate
when La Niña, El Niño and other
weather patterns are likely to return
and control weather in key crop areas around the world.
The average solar cycle from one
solar minimum to another minimum
is 10 to 12 years, but there are certain weather anomalies that prevail
during the upswing from the solar
minimum to the solar maximum
and others that occur from the solar maximum to the next minimum.
Obviously, as the weather changes
from one pattern to another during
these various phases of the solar
cycle grain and oilseed production
is altered around the world, and as
the weather cycles from one anomaly to another grain prices change as
well. This relationship can be seen
in a plot of daily world wheat prices
from 1960 through 2020.
The solar maximum and minimums seem to occur shortly after major peaks and valleys have
been reached in wheat price. To
a large degree this trend is logical since weather patterns tend to
change fundamentally as the solar
maximum or minimum is reached.
Changing weather would bring
drought relief to some areas of the
world while turning other areas dry.
Logically, there would have to be
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Milling & Baking News - October 6, 2020

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