The weather patterns this year are likely to play an important role in how the agriculture sector performs. First, it is important to understand the “naturally occurring” climate cycles of El Ni?o and La Ni?a and how they impact the US in particular:

“El Ni?o and La Ni?a are extreme phases of a naturally occurring climate cycle referred to as El Ni?o/Southern Oscillation….

US IMPACT of La Ni?a: La Ni?a often features drier than normal conditions in the Southwest in late summer through the subsequent winter (and in the Central Plains in the fall and in the Southeast in the winter)…In contrast, the Pacific Northwest is more likely to be wetter than normal in the late fall and early winter with the presence of a well-established La Ni?a.” – NOAA.gov

If the La Ni?a patterns continue through the spring and summer as most agencies around the world are predicting, this will produce heat waves, especially on the east coast and south east coast (G A, AL, FL). The North American pacific coast normally gets the tropical express that dumps lots of rain on Vancouver and Washington state during a La Ni?a weather pattern.

But because of the arctic oscillation, it is pushing that system further south which is causing all the rain and flooding in southern California and as far inland as Utah where some places are receiving 800% of their normal annual rainfall. In general, the US should fare well – and better than most regions – with plenty of heat and a decent amount of rainfall (though not as much or as timely as rain last year), but this year’s crop will not be as good as last year’s.

“Bad politics” is probably a factor that is more obvious and easier to see and understand it’s impact on investing money in the agriculture sector. With both energy and agriculture, the government continues to act and legislate in such a way that reduces the amount of supply in these sectors as demand continues to increa se and as prices rise (great environment for investing money).

One great example involving both is ethanol. Not only does it cost more energy to produce ethanol with corn than it creates (not to mention the amount of water needed), but the production of the fuel itself heavily impacts the corn market, drastically cutting the available supply for agriculture which again drives up the price (good for farmers and stock holders, bad for consumers).

And because producing ethanol requires more energy than it creates, that further increases the demand and decreases the supply of available energy to the market at a time when the US desperately needs a reliable, steady supply of energy (due to the drilling memorandums, the lack of a viable replacement for energy we currently receive from unfriendly regimes, peak oil, an exploding and energy-thirsty China, etc).

It is plain to see with these problems only continuing to get worse over time that “bad po litics” and the emerging “bad weather” will continue to be bullish for investing money in the energy and agriculture sectors for the foreseeable future.
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