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Update for October 28th, 2022

Enjoy the Warm Temps, Mississippi River Falls to New Low & Diesel Shortage


Updated Supply and Demand numbers will be released by the USDA November 9th, the day following the U.S. mid-term elections. This Sunday, October 30th Brazil will hold their Presidential election. The current president, a Conservative, Jair Bolsonaro is in a race against the former leftist president Luiz Inacio Lula da Silva. The results of this election will be closely watched and could influence markets next week.


China is continuing to follow their Zero Covid policies. Many more cities have been added to list of those in-the-midst of a lockdown including Guangdong (4th largest city in China) and Wuhan, the city best know as the epicenter of the Covid pandemic which began nearly 3 years ago. Lockdowns across China always raise concerns regarding Chinese demand in all areas of the economy.


According to Ukrainian President Zelenskyy, Russia is blocking the “full realization” of the shipping agreement. A Ukraine ministry spokesperson said, “Russia is deliberately blocking the full realization of the Grain Initiative. As a result, these (Ukrainian) ports in the last few days are working only at 25 to 30% of their capacity.” Last Friday Zelenskyy accused Russia of not allowing the passage of ships carrying grain exports and slowing the loading of 150 more shipping vessels that are waiting to be loaded. Due to these Russian imposed delays projected grain exports for the period are down by 3 MMT. According to President Zelenskyy these unrealized exports are enough to feed 10 million people. Under the U.N. brokered agreement brokered in July Ukraine has been able to successfully export nearly 11 MMT of grains and other foods. The shipping agreement between Russia and Ukraine runs out in mid-November and according to officials involved the negotiations for the extension of this deal are not making much progress. (Source: Reuters)


The threat of a rail strike in mid to late November continues to loom. The Wall Street Journal reports, “Six of the 12 railroad unions that represent 115,000 workers nationwide have approved their tentative agreements with the railroads so far, but all of them have to ratify their contracts to avoid a strike.”


We seem to move from one crisis or shortage to another very quickly and currently the crisis in the availability of diesel fuel is very real as supplies sit at extremely low levels for this time of year. Javier Blas with Bloomberg explained, “Such low levels are alarming because diesel is the workhorse of the global economy. It powers trucks and vans, excavators, freight trains and ships. A shortage would mean higher costs for everything from trucking to farming to construction.”

Much of the shortage is blamed on the fact that overall demand for diesel recovered much quicker than it did for gasoline and jet fuel after the pandemic when supply levels were diminished creating an imbalance at the refineries. The same is true around the globe which has led to unusually high demand for U.S. diesel exports. Another large factor contributing to the shortage is the loss of Russian oil supplies to the U.S. and other Western nations all of which had heavily relied on the supply from Russia prior to the war. Previously, U.S. refiners based along the Gulf of Mexico- had turned those Russian oil imports into diesel. In the last 40 years U.S. inventories of diesel have never dropped below 85 million barrels but projections for early 2023 indicate inventory levels could fall to around 80 million barrels.

The list below shows the highest average and the lowest average cost for a regular gallon of gasoline and diesel fuel across the entire country.

Mississippi River water levels have hit historical lows from Illinois to Louisiana. In Memphis, TN the record low of -10.81 feet occurred early Saturday morning and gauges all along the Midwest and South report historically low water levels which are now even lower than levels recorded in 1988. These low levels are allowing for some salt water from the Gulf of Mexico to creep up the Mississippi. To avoid any further encroachment of the salt water and protect the drinking water in Louisiana the U.S. Army Corps of Engineers is building a 1,500-foot-wide underwater levee. Cairo, IL reports that the Mississippi River water levels have reached the previous low recorded in 1901.


Some facilities with grain terminals along the Mississippi River have halted grain deliveries of corn and soybean. Cargill grain terminals in Hickman, KY, and Keithsburg, IL both posted online that they have stopped taking deliveries this week. Mike Steenhock, an executive director of the Soy Transportation Coalition stated on Wednesday that the conditions along the river are “very concerning.” He explained that approximately 50% of all soybeans grown in the U.S. are exported globally and with the extremely low water levels along both the Mississippi and Missouri Rivers the shipping of products will be considerably challenging. The period from September through February is particularly important for the efficient movement of grain as this time frame is when typically, 80% of all U.S. soybean exports occur. (Source: DTN)


The first photo below shows a pair of treasure hunters along the Mississippi near Portageville, MO. The second photo is of the Platte River in Nebraska which is approaching record low levels in many areas. (Source; Forbes; Getty Images; Craig Chandler/Director of Photography/University of Nebraska - Lincoln)

The Polar Vortex allowed for some cooler temps to make their way into the Western portion of North America earlier this month and while it restrengthened again it appears as though it may “wobble” again next week. When the Polar Vortex weakens it also makes the Jet Stream weaker which allows for colder weather to move southward into the U.S.

The planet Earth is 70% water so what happens with ocean temps and vertical velocity gives an indication of what our weather will be in the coming days and weeks and often times before the models are tuned in. By monitoring the ocean temps and energy transfer in very specific areas of the Pacific or Atlantic analogs can be used to determine likely temperature and precipitation patterns for specific times of the year.

One teleconnection that is very valuable during the winter months is the Madden Julien Oscillation (MJO). When a convective-wave firsts develops in the western Indian Ocean we then know we are in Phase 1. The wave is then tracked throughout its movement and expected progression as it makes it way across the Indian Ocean and into the western Pacific. Each phase (#1-#8) is correlated to a certain temperature and precipitation patterns for each month. Right now, we are in Phase 6 which during the month of October (and November as well) is a mild phase. All phases though produce different patterns dependent on the month in which it occurs. Most of the MJO forecast cycles show a transition into Phase 7 in November which translates to below normal temps across the entire Midwest. An illustration is shown below.

Two other important indicators to watch are the Western Pacific Oscillation (WPO) and the Eastern Pacific Oscillation (EPO). The Pacific Ocean is a massive body of water and since our weather originates from there due to the direction of the Earth’s rotation and events in the Pacific are dictated by the MJO Phase, they all work in conjunction with each other. The EPO is especially important to watch in the winter as we get the worst weather when it is in a negative phase. When this occurs it forces a ridge off the west coast of the U.S. which also allows the jet stream to buckle opening the door for Polar air to escape into the central U.S. Current projections from the EURO show the EPO will go solidly negative by November 11th BRRRRR.

That of course is more than 10 days out so this could change. In the meantime, enjoy the warm temps while they last.


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