Advisers and investors may snap up
The Old Farmers Almanac, which hit the newsstands yesterday, not only for the weather forecasts but to see which way the wind is blowing when it comes to futures.
Predictions of a bitterly cold winter for much of the country are sure to capture the attention of commodity traders making investments in heating oil.
Meanwhile, grain traders are worried about the timing of frost, which could have a devastating impact on crops.
”We think the middle part of the country, from the Appalachian Mountains to the Rockies is going to be bitterly cold, more than usual,” said Pete Geiger, editor of the Almanac.
“New England will be cold and snowy, [but] it might not be as bitter and numbingly cold as last year.”
The Central and Southern plains are expected to receive above-average amounts of precipitation. Significant snowfalls are forecast for all regions, including a major storm in mid-February involving blizzard conditions for New England, the Almanac says. The Southeast and Southwestern parts of the country will experience a milder winter.
While weather is a motivator for energy trades, supply and demand issues are also key factors, said Ray Carbone, president of the commodities trading firm Paramount Options Inc.
“If the situation is one of light supply [for oil and natural gas], then a weather prediction can have an effect on prices,” he said. “If we have that bitterly cold winter, it definitely plays a part in some traders' decisions.”
At the moment, heating oil supply is not as abundant as natural gas, but the bigger threats to heating-oil futures are weather events such as hurricanes, which could pass through the Gulf of Mexico, where many oil refineries are located, Mr. Carbone said.
In the grain futures market, the biggest anxiety is an early frost, should one occur before the historical average date of Oct. 6.
An early frost is possible for the Midwest during the week of Sept. 21, “from the Green Bay area to the Twin Cities and north of Des Moines, Iowa,” said Greg Soulje, meteorologist of the DirectTV program, “This Week in AgriBusiness.”
“There will be below-average temperatures all the way to the Eastern Seaboard.”
While corn crops have advanced to the point where most of the crop will likely survive, soybeans are lagging in maturity and susceptible to serious damage from an early frost, traders say.
Freezing temperatures were recorded in some northern areas of Minnesota, Wisconsin and Michigan just last weekend.
“We just missed a bullet,” said Jim Bower, president of Bower Trading Inc. in Lafayette, Ind. “If it was 300 or 400 miles further south, it would have been a major event.”
Also, the supply and demand ratio for soy beans is very tight compared to corn, he said.
“It's not an easy trade right now,” Mr. Bower said. “Some traders have gone to the sidelines because it's too hard to call.”
