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Trouble on the Horizon for Wheat


And DBA is the way to play it.

There's trouble coming for wheat.

Last week, both the US and Canadian crop forecasts were released. Both countries are predicting the wheat crop for 2009 will be 18-20% below the 2008 harvest. However, the Canadian crop will require a significant improvement in weather conditions to reach -18%.

It's been extremely dry and cold in much of the Canadian prairies this past winter and spring. There were widespread frosts last week in Canada, but it has been so cold that much of the crop hasn't even sprouted yet, so the damage was minimal. The next few weeks will be critical as warmth and rain will have to show up to prevent a much lower harvest.

The cold extends from the Mideast to the East Coast in the US. In Illinois, only 70% of the corn crop has emerged from the ground, with is about 3 weeks late and the slowest crop in at least 50 years. This doesn't look like a problem for corn, which is projected to be within 2-3% of last year's crop.

Why is it so cold in Canada? Actually global temperatures as measured by satellite peaked in 1998 during a huge El Nino. Since then the trend has been slightly down, but not dramatically down. There are two possible factors. One is the volcano, Mt Redoubt in Alaska that has been erupting since March and at times has thrown ash plumes 60,000 feet into the air. Prevailing winds would take some of that ash into Canada and reduce the strength of sunlight reaching the ground.

The other possibility is the sun itself. More than 200 years ago an English astronomer, William Herschel noted that wheat prices peaked when sunspot activity was minimal. Sunspots have a cycle of about 11 years and currently sunspot activity is the lowest it has been in almost a century.

If you look at sunspot activity for the past 400 years, especially around the turn of the centuries, there have been some significant lows in sunspot activity. More importantly, these sunspot lows occurred during unusually cold periods here on Earth. The Maunder Minimum, the period from 1650 to 1715 had almost no sunspots for 65 years. Not so coincidentally, this was the peak of The Little Ice Age, which led to great hardship as crops failed throughout Europe.

Is there any reasonable scientific explanation that can correlate sunspots to temperatures on Earth? Perhaps, and it's an "out of this world" answer: cosmic particles. Cosmic particles are particles from space that hit the Earth's atmosphere. They are primarily protons and helium atoms stripped of their electrons. They are not "cosmic rays" because as cosmic particles they arrive individually, not as a continuous ray. Cosmic particles can hit Earth's atmosphere with immense energy, close to the maximum energy that man-made particle accelerators can produce.

When a cosmic particle hits the upper atmosphere and slams into a molecule, all hell breaks loose, and a cascade of different particles can be created as the energy of the cosmic particle is adsorbed by the atmosphere. It is the subset of these particles that get to the lower atmosphere that are of interest.
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