In February 2021, much of the continental U.S. faced temperatures that were below 0° Fahrenheit. Frigid temperatures were reported into northern Mexico. Parts of Texas were so cold that its power systems were tested and many went without power for a time. Unofficially referred to as Winter Storm Uri, the storm cost Texas agriculture at least $600 million.
In the coming days, much of the U.S. and Canada is forecast to have a burst of cold temperatures. This week, we examined what happened in February 2021 to prepare for what could be coming.
The U.S. ethanol sector was directly impacted from the frigid temps, which largely shut down portions of the U.S. that week.
Weekly ethanol production slipped to its lowest level since COVID, but excluding that time period, production was at its lowest level during the cold burst in over a decade. Stocks also slipped that week with the production slowdown a plus and, in subsequent weeks, stocks more or less continued to dwindle for a time.
Canada’s monthly canola crush volume for February also slipped. Usually, February is a light month given there are fewer days, but in 2021, January and March volumes far exceed February's total, with our opinion that the surge in frigid temps limited Canada’s crush in February 2021.
The forecast calls for colder than normal temps across the U.S. and Canada starting December 22 and lasting for a few days. Specifically, December 23 shows that most counties will experience below-freezing temps that day.
But the current outlook is not as cold as far south as the storm we faced in February 2021. Even better news for the farmer is that despite the wintry storm in February 2021, U.S. average basis levels for corn, soybeans - and specifically at ethanol and crush facilities - did not dip in any magnitude. In fact, basis was moving higher before and continued to do so after the cold weather blast in February 2021.
Canada also is set to have frigid temps with the coldest days expected for December 22 and 23. That could slow down crush activity, especially ahead of the holiday season. We are not overly concerned about a big loss in crush opportunity given the weather forecast, but December could come in slightly below expectations if these frigid temperatures do materialize.
The cold temperatures in the forecast could negatively impact U.S. ethanol production and/or U.S./Canada crush for December, but based on what happened in February 2021, big negative impacts to grain producers due to the weather is not likely.
Livestock producers may face the toughest headwinds with keeping animals healthy and warm enough during the cold weather. Being that the coldest temps are set for the weekend and into the holiday season, extreme losses in grain activity are not expected.
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