Prepared by Atlas Forecasts

I believe the hard red winter crop will get enough subsoil moisture over the winter to produce an average crop in 1998. The spring may be dry, but the subsoil moisture should carry the crop through most of the dry spells. For corn, I suggest you choose drought resistant varieties. Also soybeans do better in dry hot years than corn.

While Australia and South African often have crop problems in El Nino years, the reverse is true of Latin America. Brazil and Argentina usually have good to above average yields. To date, rainfall has been above average in central Brazil. I expect the good weather to continue throughout the growing season. In fact the major problem may be too much rain. With soybean prices as high as they are, the acreage planted will increase again over last year and a new record in production is possible. There will be a decrease in the acreage planted to corn.

In a normal sequence of El Nino events, South Africa should have a poor corn crop. Rainfall has been below normal in many parts of Africa and they are normally good indicators of what will happen in South Africa in December and January. However this year I believe that rains will come somewhat late. Thus there will be a below normal crop, but not one that is significantly below normal. A crop of 8-10 million tonnes of corn production is possible.

Contrary to the El Nino pattern, Southeast Australia has received enough rainfall to make a shambles of their forecasts of drought. The growing season is not over yet. Instead of a very poor crop, Australia may produce a wheat crop of 15-17 million tonnes. This is still below the record of 23 million tonnes produced last year but still a very respectable crop.

This El Nino caught most of the professional forecasters by surprise. It seemed to appear out of the blue. When it was confirmed, they did not think it would be a significant event. Instead it became the strongest El Nino in the last forty years. The U.S. government has easily spent over 1-2 billion dollars on computer models. These models failed to predict what was going to happen in as little as two months into the future. If billion dollar computer models cannot predict two months in advance, what is the possibility that you can predict global warming 100 years into the future? The answer is you cannot. It does not matter how many billions of dollars you spend on the models. If you do not understand how the system works, the models will never get the right answer.

I expect this El Nino to reach a peak in January and then to fade quite rapidly into the spring. By the summer of 1998 the sea surface temperatures in the eastern tropical Pacific Ocean should be near the cool side of normal. Everyone will start talking about the onset of the La Nina phase of the cycle.

The drought continues in Indonesia, Malaysia and West Africa. Estimates of world cocoa production should continue to fall until some significant rain begins to fall in Southeast Asia. The full extent of the damage will not be known for at least another three months. However world production will definitely be down 5-15% from last year.

October 30, 1997Dr. Paul Handler, Editor

Atlas Forecasts

706 West Oregon Street, Urbana, Illinois

Financial Commentary

THE ALLENDALE ADVISORY REPORT | ASTRO-TREND | SPRING OUTLOOK
COMMODITY FUTURES FORECAST WEEKLY REPORT
THE OPTION ADVISOR
COMMITMENT OF TRADERS ANALYSIS-CURRENCY CONTRACTS
MYERS ON FUTURES | NIKKO MARKET COMMENTS | NIKKO MARKET COMMENTS
SORTING IT ALL OUT | INTEREST RATE WATCH | FINANCING AND THE “NEW” CANADA
U.S. TREASURY BOND TECHNICAL ANALYSIS
ITALY: WILL MARKET OPTIMISM BE REWARDED
SEEING THROUGH THE ILLUSIONS IN STRUCTURED FINANCE
EL NINO OUTLOOK | THE REAPER MARKET COMMENTS | WEEKLY OUTLOOK
YOU SHOULD BE FULLY INVESTED FOR THE NOVEMBER-DECEMBER-JANUARY RALLY

Consensus National Futures and Financial On Line Index

Copyright 1997, by Consensus Inc.  All American and Pan American rights Reserved. editor@consensus-inc.com

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