The video above discusses the weather extremes affecting South America’s soybeans, coffee, and sugar crops.
Will the chances for rain increase in drought-stricken N. Brazil and the floods ever abate in southern Brazil? There could be some important rains (down the road) for northern Brazil, with flooding occurring to the south. So how do you trade coffee and soybeans and what is my longer-term view?
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These are the climatic factors resulting in incessant rains in southern Brazil, while northern Brazil has record heat:
A mix between strong vs. weak El Niño conditions
The MJO is moving into phase 2/3
Deforestation of the Brazil rainforest
Flooding and landslides triggered by heavy rains in southern Brazil have claimed at least six lives over the past week, The fatalities occurred in the states of Santa Catarina and Rio Grande do Sul, and major property damage in the latter was reported as thousands of people sheltered in gymnasiums.
Southern Brazil has been hit by historic rains in the last few months. This could threaten soybean planting and production in two of Brazil’s key producing states.
Soybean planting in Brazil is way behind schedule (Source: AgResource)
In contrast, extreme heat is threatening soybeans in Matto Gross (the #1 soybean-producing area)
Climatological factors causing a wide variety of Brazil weather
There are a few key factors that can contribute to a pattern of flooding in southern Brazil and heat in the north during November in an El Niño year:
El Niño shifts tropical rainfall northward, leaving southern Brazil and Rio Grande do Sul susceptible to frontal systems and atmospheric river events that stall and lead to heavy rainfall and flooding.
The warmer tropical Atlantic waters during El Niño allow more moisture transport into southern Brazil, increasing rainfall intensity.
With reduced tropical rainfall across northern Brazil during El Niño, prolonged heat is more common as subsidence and dry conditions dominate.
Weakened easterly trade winds allow cold fronts to penetrate farther north into Brazil’s northern regions during El Niño.
These displaced fronts and overall circulation changes enhance north and south Brazil’s temperature gradient and extremes.
Deforestation of the Amazon in conjunction with El Niño, has built a huge, hot ridge in northern Brazil.
We have a mixed situation in the jetstream pattern in the Southern Hemisphere right now, while Pacific Ocean temperatures are incredibly warm, portending strong El Niño conditions, other variables we look at depict weak El Niño conditions.
The MJO
There is also a climatic phenomenon called the Madden-Julian Oscillation Index (MJO. It is like a traveling pulse of storms and rainfall that moves eastward around the equator, and it is a weather pattern that can influence things like monsoons and tropical cyclones. This makes the weather more active in some regions and quieter in others. Picture it as a cycle of increased and decreased rainfall marching across the globe.
Contrasting two El Niños: The MJO was in similar November phases during these 2 infamous El Niño events. One was weak (2009) and one strong (2015). Both of these years had heavy rains and flooding in parts of southern or central Brazil affecting either sugar cane or soybeans.
This November, it is soybean areas in Rio Grande Do Sul (#2 biggest Brazil soybean producer) and Santa Caterina experiencing the worst effects of flooding.
As my discussion illustrated at the top of this report — El Niño can often bring heavy rains to parts of central or southern Brazil. The most recent infamous case was in the fall (Brazil spring) of 2009. The result was extreme crop stress and dilution of Brazil’s sugar crop.
Brazil’s sugar crop was diluted due to heavy 2009 rains. There was also a drought in India as there was this year.
Global weather and crop conditions suggest two different types of El Niño events
During weaker El Niño events, such as in 2009 (2nd map below), notice how much further north heavy rains were during October than during the strong El Niño of 2015. This was much more of a detriment to the sugar crop than to other commodities like coffee or soybeans.
CONCLUSION:
Global weather patterns are fluctuating between weak and strong El Niño conditions. Despite its weakness, historically weak El Niño events, like 2009-2010, impacted global crops such as sugar and cocoa, leading to notable market volatility.
This season, intensified weather extremes in Brazil, fueled by a strengthened northern Brazil ridge, raise concerns for soybean production in Matto Grosso. The heightened ridge, stronger than in November 2009, may amplify crop problems, underscoring the potential extreme volatility in the soybean market.
Will the 2009-2010 pattern be similar this season for the soybean market? This is what I will be answering for subscribers to my WeatherWealth newsletter.
Frequent trading strategies and long-range weather forecasts are available for multiple commodities.
In this video (click above), I discuss the MJO index and how we use it as a weather forecasting tool in conjunction with El Niño:
Where the MJO will move to, and if it will influence the outcome of northern Brazil’s soybean drought;
the potential for a colder outlook in U.S. natural gas heating demand areas; and
a continuation of disease issues for West African cocoa.
While Equatorial Pacific Ocean temperatures are very warm suggesting strong El Niño conditions, other variables do not justify El Niño being more than weak-to-moderate.
For example, the MEI index (above) is a better representation of how strong El Niño is. This takes into account global atmospheric angular momentum GLAAM), and the SOI index and is also influenced by the progression and strength of the MJO.
Feel free to download a complimentary issue of one of my full WeatherWealth reports with recent trade ideas here and how we forecast longer-range weather for farmers and traders on six continents.
My video talks about what is going on in South America concerning some new weather problems for soybeans, sugar cane, and possibly coffee (though recent rains have been great news for the early coffee bloom in Brazil).
I also show some interesting images of historic artifacts being exposed by lowering water levels and record drought in the Brazil Amazon, and a look at solar cycle 25 and the active sun.
Sunspot cycles occur every 11 years. Without going into too much detail, the number of sunspots is approaching 2014 levels. In layman’s terms, this means the next sunspot cycle peak should not occur until at least 2024 or 2025.
In my view, and of many NOAA and MIT scientists: “solar cycles do not have the effect they once had on global weather due to the warming planet and stratosphere.”
Currently, it is El Niño and the Amazon rainforest drought and deforestation emergency that will determine many agricultural commodity price moves based on South American weather over the next few months.
Sign up for my El Niño report and some occasional free weather and commodity updates below.
The El Niño-driven bull markets in cocoa and sugar
Two bull markets in soft commodities have been in cocoa and sugar brought on by a variety of summer weather problems from India to Thailand and West Africa.
My cocoa Spider, featured in my WeatherWealth newsletter for about 8 commodities each week, has been basically bullish cocoa since summer. Sometimes it has gone neutral, but overall, we have developed long-term bullish call option spread ideas for summer.
Wet November weather could further compromise cocoa and sugar crops
This time of the year, dry weather is needed for the sugarcane harvest in Thailand (the #3 producer) and in the Ivory Coast and Ghana (top cocoa producers) where the incessant wet weather has caused disease issues all year.
Usually, El Niño can bring wet weather for Thailand in November but typically it dries out in West Africa for the remaining main crop harvest. One such El Niño year that was super wet in Thailand was 1987. The fact that West Africa has remained wet is atypical of El Niño and more so due to warming oceans and Climate Change.
Wet weather in Thailand during November can negatively impact the sugar crop for a few key reasons:
Flooding – Heavy November rains in Thailand bring a higher risk of flooding, which damages sugarcane fields and disrupts harvesting.
Cloud cover – Increased cloud cover and reduced sunlight slows sugarcane growth during this critical time before the harvest. Photosynthesis is diminished.
Disease – Wet conditions promote fungal diseases like red rot, which damages stems and leads to sugar content loss.
Delayed harvest – Excess soil moisture makes it harder to operate harvesting equipment on muddy fields. This can delay crop collection.
Diluted sucrose – High rainfall right before harvest dilutes the sucrose concentration in stalks, reducing sugar content.
Crop loss – Severe floods from monsoons can completely submerge and destroy portions of the sugarcane crop.
Overall, wetter than normal November weather reduces both the quantity and quality of sugarcane yields in Thailand. Dry conditions are needed for optimal sucrose development and timely harvest. Excessive rain has a very detrimental impact on both yields and sugar content for the Thai sugar industry in the critical pre-harvest period.
While adequate rainfall is crucial for cocoa production in Ivory Coast and Ghana, excessive wet weather over months can cause major issues:
Prolonged heavy rains increase the prevalence of fungal diseases like black pod rot and myriads. These have caused severe damage to cocoa crops recently in very wet conditions.
Overly wet soil makes bean harvesting and drying more difficult. This can delay and disrupt cocoa harvest operations.
Persistent moisture also promotes canker and algal bark diseases which damage cocoa tree health and yields.
Flooding from heavy rainfall can rot the roots, asphyxiate trees, and reduce yields.
So while November rains are important for cocoa pod development, too much rainfall over consecutive months promotes crop diseases, hampers harvest logistics, and reduces bean quality.
This video (click above) talks about the Amazon rain forest, the teleconnections that will influence November weather, and how heavy rains and flooding in parts of central and southern Brazil are impacting soybean planting, and the sugar cane harvest but benefitting coffee trees.
HELPING YOU MAKE THE BEST INVESTMENT DECISIONS BASED ON THE WEATHER
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