Distressingly different market outcomes plausible for 2013
Approaching 2013, purchasing executives could not be blamed if their wishes for the new year include a respite from what has been a nearly incessant, extended period of difficult, volatile, unpredictable, unforgiving markets. Unfortunately, analysis of prospects for the year ahead show that hopes for peaceful market conditions seem entirely wishful. What’s worse is that rational analyses of outlook for the new year offer prospects that are not slightly but completely bearish on one side and extremely bullish on the other.
Rabobank’s annual commodities outlook noted that a period of market strength early in the year should be pressured later by winter wheat acreage that is the largest since 2008 and then corn plantings at a record 97.6 million acres. Meanwhile, in a monthly update, Drew Lerner described possible dire consequences to winter wheat from the unprecedented fall drought that resulted in poor early season growth.
“Wide temperature swings in recent weeks well above average and then below average and back above average again is a pattern that will exacerbate the heaving situation,” he said.
Soil heaving occurs when temperatures swing between extreme cold and unusual mildness, exposing root systems and leaving wheat plants susceptible to winterkill. He also voiced fears, which still could prove unfounded, that the drought in the Corn Belt will continue into the next growing season with devastating effect.
The 1990s showed markets have the potential for extended periods of price stability, but going into 2013 this period appears likely to recede ever further into the collective memory of grain-based foods.