Cold Snap Spooks Commodities

Frigid temperatures are descending across much of the United States, bringing snow and ice to many Midwestern states.

The early snow is adding stress for farmers who are already behind on harvesting this year’s corn and soybean crops. As of last weekend, only 41% of the corn crop and 62% of soybeans had been harvested, compared to recent averages of 61% and 78%, respectively.

Snowy, wet fields slow machinery, and the extra moisture can deteriorate the crop quality, although the damage and delays haven’t hit a critical level yet. As a result, corn and soybeans were only mildly higher this week, trading Friday for $3.88 and $9.25 per bushel, respectively.

Meanwhile, the sudden drop in temperatures is causing homeowners to turn up the heat, creating a short-term spike in demand for heating fuels, especially natural gas. Fears of supply tightness spooked prices to a seven-month high on Halloween, with December natural gas topping out near $2.74 per million British thermal units.

Despite the cold snap, longer-term forecasts for this winter call for mild weather. Scientists with the federal government’s National Oceanographic and Atmospheric Administration (NOAA) are projecting this winter will be warmer than usual for much of the United States, although the Midwest should see normal temperatures. Overall, warmer temperatures should keep a lid on heating fuel costs.

At the same time, NOAA expects this winter could be especially wet for the Midwest, which could cause a repeat of last spring when flooding created crises across the Heartland. Farmers may have to contend with flooded or soggy fields again, slowing the planting of 2020 crops as well.