July 17, 2015
El Niño Strikes Back
Forecasters expect this year’s El Niño to be exceptionally strong, bringing potentially drastic weather changes. The weather phenomenon, which causes the Eastern Pacific Ocean to be abnormally warm, has far-reaching effects, causing droughts in India, reducing Atlantic hurricanes, and even making Midwest winters a little warmer.
In the coming months, NOAA is calling for continued cooler, rainier weather in the Midwest, but the winter could be milder and drier.
For grain farmers, the wetter weather could cause headaches for the growing corn and soybean crops, but at least there will be little concern about drought this season.
Outside of the Corn Belt, significant changes could occur as well; California is expected to get heavy precipitation, potentially relieving the drought-stricken state, while the Southeast is expected to be drier than usual.
Oil Slides on Iranian Agreement
Mid-week, a long-awaited landmark accord regarding Iran’s nuclear program between Iran, the US, and five other world powers was announced in Vienna, causing a sharp acceleration in the drop of petroleum prices. The removing of sanctions against Iran will allow crude oil and other exports to resume, provided Congress doesn’t veto the President’s approval of the agreement.
There was a selling response in the oil market this week, as traders realized that the 25 million barrels of crude currently in floating storage off the coast of Iran could be dumped on the market when the sanctions are lifted. Longer term, the expectation that Iran will increase oil production and exports dramatically could press prices even lower.
Concerns about the slowing economies of Greece and China also worry investors that oil demand could slip while the oil supply from Iran and other sources, such as US shale and Canadian tar sands, continue to weigh on prices.
Meanwhile, gasoline and ethanol prices dropped more than 10 cents per gallon during the week, a blessing for drivers, but a curse for refineries and ethanol producers.