Please watch the video above about all the extreme weather in the last two years and investment opportunities to help heal the planet.
Investment opportunities to combat environmental degradation range from new technologies in green hydrogen to the innovation of carbon capture companies. Here at Weather Wealth, not only do we advise farmers and traders around the world in commodity ETFs, futures, and options but potential investment ideas in technologies such as this,
For nearly three months we have touted an end to the northern Brazil coffee drought due to the third consecutive winter (South American summer) of La Niña and other climatic variables we analyze for clients. We were lucky enough to catch most of the big move south a month or two ago from over $2.00 to about $1.55 per pound.
However, coffee prices wiped all of those bullish traders out of the market. They were focusing on other fundamental factors and not the weather. My Best Weather “Spider” was at a very bearish minus nine (-9) during September and October. Recently our Spider became more neutral before the price spike.
Where the Spider Is Now
Notice, for example, the “anti-herd mentality” of a +2 (bullish) due to too many shorts in the market in the last few weeks. Also, see how global crop prospects changed in my view, from a -3( bearish) to neutral to slightly positive (+1). The Spider below was released yesterday to clients before Tuesday’s big price rally.
Two Crop Issues in the Coffee Market
Two crop issues have returned to the coffee market. One is that, even with all the rain in northern Brazil the last 2 months, some concerns from hail damage in Minas Gerais and some trees stressed from the drought a year or so ago and frosts are not producing an excellent bloom. The other problem is the incessant Vietnam rains right in the middle of their harvest. This is typical of La Niña, but the rain presently is particularly heavy. It could lower the Robusta coffee crop.
Source: Jim Roemer and StormVistaModels.
So… how does one trade coffee? The first chance I see of a drying trend for Vietnam and/or hear new reports with respect to the Brazil coffee crop, I will recommend specific JO (ETF) and options positions for traders.
The historic volatility in natural gas continues. Last Friday, I told WeatherWealth clients about a major change in the weather pattern with a potential colder than normal late November and December. Natural gas prices proceeded to rally $1.00 from last Thursday’s lows and bearish EIA number to this Monday’s highs ($7.22) based on other firms changing their weather forecast.
This video describes both La Nina and what we call a “negative Eastern Pacific Oscillation Index. The combination of these two climatic variables working together can produce a cold, early winter. Why then did natural gas prices pretty much give everything back in one day? Incredible.
Four Reasons for Natural Gas Moves
Here are the reasons I felt that natural gas (UNG) prices ran up too much, too quickly in the face of changing weather forecasts. After all, we had a near-record warm fall (globally) that has hurt natural gas demand. In addition, the main LNG export terminal in Freeport, Texas has been down for months.
1)Natural gas prices above $5-$6 this time of the year is very unusual as U.S. production continues to grow.
2) While the LNG export terminal will reopen soon, the weather forecast is warm for Europe. Hence, we need to see sustained cold weather, not just here in the U.S. but in Europe to help demand.
3) The weather last week was very warm across the United States and near-record temperatures this week. While potential colder late November and December weather could well occur, the natural gas market was anticipating another bearish EIA report this Thursday.
4) The European forecast models suggest that after just a week or so of U.S. cold, it will warm up again.
The European Model warms things up after Dec. 6 (red=warmer than normal). Source: Stormvista.com
So what to do in the natural gas market currently?
Based on extraordinary natural gas and weather volatility, using certain option positions is the way to go in this market. This is something we advised quite successfully in several commodity markets over the last few months.
Feel free to take a complimentary trial of our twice-weekly weather-commodity newsletter (Weather Wealth) and see this and many other reports. You can also learn how you can mimic our trade ideas in a new program called AutoTrade. All the information is here:
A “monsoon on steroids.” That’s how the UN Secretary-General described the weather bringing the climate-related floods to Pakistan and its crops. Most importantly for international markets, these include cotton and possibly wheat. Since June, over 1,100 people have died and one-seventh of the country’s population has been impacted by floods. The storms damaged around a million houses. Monsoon rains are over 400 per cent heavier than normal in some key agricultural provinces. The most Indus River flood damage is occurring in Sindh province, Pakistan’s second-largest producer of wheat and cotton.
Kharif (Monsoon) Crops Had a Hard Start This Year
Pakistan has two main growing seasons, winter and monsoon, also called kharif. Kharif crops include cotton, rice, sugarcane, and corn, as well as staples like dates, chilis, and onions. The main concern for planting this year’s kharif crops was drought, at first, as 21.6 per cent less rainfall than normal fell nationwide from January to April. High temperatures also plagued Sindh, Balochistan, south Khyber Pakhtunkhwa, and southern Punjab, which, in the main, are the areas now flooded.
Even before the catastrophic floods this monsoon season, drought impacted Sindh province’s agriculture. Sindh Agriculture Extension Department data showed 2022’s wheat production to be 17 per cent below the government’s targeted amount. The government target for cotton planting was 19 per cent higher than Sindh’s actual acreage.
The Monsoon Rains Pummel Cotton
Planning Minister Ahsan Iqbal told Reuters that almost half the country’s cotton crop had been destroyed. While Punjab provides the majority of Pakistan’s cotton crop, the monsoon destroyed almost all of Sindh’s crop.
By August 23rd, the outlook for cotton production in Sindh province already looked grim. “So far there is 45 per cent loss in cotton, 85 per cent loss in dates, and 31 per cent loss in rice in Sindh due to the ongoing monsoon. The standing sugarcane crop has also suffered damage up to 7 per cent due to floods, despite it being a high water-consuming crop, [which shows] the intensity of the disaster we are facing,” said Ali Nawaz Channar, technical director at Sindh’s Agriculture Extension service.
Within days, others estimated that continuing rains increased the losses. “The crop of cotton is almost 90-100 per cent damaged,” said the chair of the Sindh chapter of the Pakistan Businesses Forum. The Chief Minister of Sindh said 90 per cent of the province’s farmers had damaged or completely destroyed crops.
Many Pakistanis Work in Ag; Cotton Drives Pakistan’s Exports
Around 37 per cent of Pakistan’s population works in agriculture, a sector that provides 22.4 per cent of the country’s GDP. Textile products and cotton make up around 60 per cent of the country’s exports. Cotton prices have already risen and Pakistan needs to increase imports to keep its mills spinning in the coming months.
Wheat: Even After Rain Stops, Monsoon’s Damage Will Be Ongoing
“Now there is so much water that no future cultivation can be made. It would be impossible to grow wheat and sugarcane in Oct/Nov,” the Sindh Chamber of Agriculture President told a national newspaper. Predictions are that monsoon waters are unlikely to recede to allow timely wheat planting in October and November in many places. There also will be the need to repair irrigation systems and the more than 20 dams already breached or destroyed. Sindh province is home to the world’s largest barrage-based irrigation system.
Any decline in wheat production will only add to Pakistan’s humanitarian needs. While cotton fuels exports, it is wheat that fuels the country. Wheat makes up 70 per cent of Pakistan’s grain production and it is the country’s main food source. Even before the ravages of the COVID epidemic and the current flooding, approximately 40 per cent of Pakistanis were food insecure.
How Pakistan Got Here and What Comes Next
Many Pakistani commentators online blame the extent of the current crisis on the failure of the country’s government to make strategic infrastructure upgrades after 2010’s devastating flooding.
Pakistan is the 8th most affected country on the Long-Term Climate Risk Index. Increased temperatures and melting glaciers in Pakistan’s northern mountain region are the causes of the monsoon’s heavy rainfall, according to many analysts. The country has over 7,000 glaciers, more than anywhere on the planet outside the Poles. Neither increased global temperatures nor the melting glaciers are likely to end soon.
It’s not like Pakistan doesn’t have enough long-term woes. The IMF this week provided a new tranche to help the country stave off default and to address its ongoing economic crisis. And the heavy monsoon may also be seeding another problem for the country’s agriculture. FAO posits that the unexpected volume of rain may lead to increased locust breeding along both sides of the Indo-Pakistan border.