The Indian Ocean Dipole (IOD) is a climate phenomenon affecting the Indian Ocean. During a positive phase, warmth is pushed to the Western part of that body of water, while cold deep waters are brought up to the surface in the eastern end of the Indian Ocean. This pattern is reversed during the negative phase of the IOD. It is also known as the Indian Niño, as it draws similarity with the El-Niño Southern Oscillation (ENSO).
What are we looking at?
The plot tracks the conditions in the Indian Ocean, showing the phase of the IOD both now and in the past. Right now we are in a negative phase.
When the value of the time series is positive (red shading), the warm phase of the IOD is present with higher sea level in the western Indian Ocean and lower sea level in the eastern Indian Ocean.
When the value is negative (blue shading on graph above), the cool phase of the IOD is present with lower sea level in the western Indian Ocean and higher sea level in the eastern Indian Ocean. This is what we have today.
Why is it important in commodity trading?
The IOD influences tropical commodities in Africa, Australia and Southeast Asia the most.
During the positive phase of the IOD, the high temperatures along the coast of Africa cause heavy rains and droughts in Australia.
During a negative phase the high temperatures and rainfall patterns are reversed. The sea-level changes associated with the IOD can also lead to increased threats of coastal flooding and associated impacts. However, for west Africa, a negative IOD phase coupled with an El Niño can bring bull markets for cocoa with dry spring and summers often occurring affecting the main crops in Ivory Coast and Ghana.
Presently, we have an El Niño neutral situation and a developing negative Indian Dipole. Hence, the situation is a bit confusing, but could portend a decent (not great) main cocoa crop and possibly take the steam out of the recent two year bull market.
Source: Jim Roemer (Climatepredict software): “If there was an El Niñno in 2025, which there is not, drier weather and a potential bull market would occur this summer“
The negative phase of the IOD brings about the opposite conditions of a positive IOD, with warmer water and greater precipitation in the eastern Indian Ocean, and cooler and drier conditions in the west.
The IOD also affects the strength of monsoons over the Indian subcontinent. This is what we have presently: A negative Indian Ocean Dipole, whose effects should be for a general good monsoon in India that tends to be bearish commodities such as sugar.
The impact of monsoons on Indian farmers
A majority of India’s GDP is dependent on the growth and production of agriculture. India is an agrarian nation, with more than 50% of the population earning their livelihood in agriculture.
The monsoon is the most important season for farmers in this country. A majority of Indian agricultural land is watered by the southwest monsoon. Field crops such as sugar, cotton, wheat, rice, and legumes are staple foods in India. They require strong rainfall in order to grow.
Does the Indian Monsoon affect summer corn belt weather?
There is only a little evidence that the Indian monsoon has a significant or consistent effect on Midwest Corn Belt weather. The Midwest’s weather and crop yields are primarily influenced by local factors such as precipitation recycling, land use, and groundwater, as well as larger-scale patterns like El Niño and La Niña. While global weather systems can sometimes interact, and changes in major monsoon systems may have indirect or minor effects on global atmospheric circulation, any direct linkage between the Indian monsoon and Midwest Corn Belt weather is not established in the search results.
You can see on my ClimatePredict program below (available to subscribers to WeatherWealth newsletter), there is a slight (-.31) correlation of the Indian Dipole and July corn belt rainfall.
In other words, a negative IOD, which is negatively correlated, suggests a slight chance for above normal corn belt rains (two negatives = a positive value). Notice, however, the correlation is much higher with El Niño/La Niña (+1.01). An El Niño (warm ocean signal) is positively correlated with corn belt rain. In other words wet, while La Niña is the opposite– a dry bullish signal like 2011 and 2012. Right now, we have mixed “El Niño neutral” conditions.
July temperature tends to to be hotter than normal for the Midwest corn belt with a negative IOD. Here too, the correlation is much weaker with the IOD than El Niño/La Niña and other teleconnections
Conclusion:
It promises to be another wild summer for the grain market, as the potential for hot summer weather will increase market volatility. The Indian Ocean Dipole being negative and an “El Niño neutral” event does suggest that most (not all) of the Midwest grain belt should have decent summer rains.
With respect to soft commodities, potential crop problems may continue for parts of West African cocoa, while Robusta coffee and sugar crops recover in Southeast Asia. This could keep these two commodities in a more longer term bear market. Of course, the behavior of the Brazilian Real, US dollar and crops in various locations will also play a role.
Below are excerpts from my recent WeatherWealth newsletter. Many agricultural commodities are breaking out to the upside and the weather is definitely a key reason. In contrast, warmer U.S. weather returning and worries over a potential increase in domestic oil production, combined with trade tariff concerns have pressured energy markets again.
The new bull market in many agricultural commodities could add to inflation worries once again
It was these wilting trees in 2024 that have now resulted in recent crop survey tours with many analysts lowering their 2025-2026 Brazilian crop by another 5-10%.
Improved October rainfall kept the situation from being even more of a disaster. Nevertheless, coffee stocks continue to fall and the charts are very bullish.
In addition, a stronger Brazilian Real results in farmers holding back on sales of commodities such as coffee, soybeans and sugar.
Going forward, the big question for the coffee market is “How will a weak La Niña event (or neutral situation) affect production in Vietnam, Colombia and Brazil, deeper into 2025-2026?” I will have studies later on. of course.
Nevertheless, due to Theta (time decay) for certain coffee option strike prices, we suggested call option strategies that were potentially profitable for those WeatherWealth clients who took our advice two months ago.
Why cocoa prices have higher to go, even at these historical levels
One of our most successful recent trade suggestions to WeatherWealth clients has been in cocoa. Prices have now soared more than $11,000 a contract in two weeks on growing new concerns for the 2025 West African mid-crop, but also potentially for the main crop. The crop problems never end in West Africa. In my opinion, this is brought on more by climate change than by El Niño or La Niña events.
My in house teleconnection program looks at weather signals thousands of miles away to second guess standard computer models.
Typically with a weak La Niña (negative MEI index), we can see a wet signal for West African cocoa (+3.45).
However, notice that a total of six of the most important climatic variables I look at above (Indian Dipole and record warm ocean temperatures in the Atlantic and near West Africa) are all dry signals (negative values). One combines all of these and we can see that humidity levels and rainfall will remain below normal, thus hurting more of the cocoa crop.
Why, In The Face Of A Bear Market In Sugar, We Reversed Our Attitude
Other than the Brazilian Real breaking out technically that can often help sugar and coffee prices, new weather problems in Australia from harvest delays and a lower crop in Thailand, as well as in India, helped sugar prices rally 10% off their lows.
We caught wind of this around January 21st and advised subscribers to our WeatherWealth newsletter that I was no longer bearish and to look for potential buying opportunities.
Is it too late to buy sugar now. Is this old news? That’s where our newsletter comes in handy for many markets. We also issue “Weather Spiders” each week for all markets.
Sources: A Real Sugar Expert & WeatherWealth Newsletter
Learn how to trade commodities successfully based on weather, the commitment of traders, technical analysis and other signals. Join farmers, traders, agribusinesses, natural gas producers and ETF enthusiasts around the world who want to benefit from more accurate weather information and timely trading strategies.
Jim Roemer, Scott Mathews, and The Weather Wealth Team
Mr. Roemer owns Best Weather Inc., offering weather-related blogs for commodity traders and farmers. He also is a co-founder of Climate Predict, a detailed long-range global weather forecast tool. As one of the first meteorologists to become an NFA registered Commodity Trading Advisor, he has worked with major hedge funds, Midwest farmers, and individual traders for over 35 years. With a special emphasis on interpreting market psychology, coupled with his short and long-term trend forecasting in grains, softs, and the energy markets, he established a unique standing among advisors in the commodity risk management industry.
Several times a year, we offer farmers and commodity traders on six continents a free issue of WeatherWealth: The only global commodity weather newsletter that focuses strictly on the weather with specific trading ideas in commodity options, futures, and ETFs.
Some of our best calls over the last two years were predicting mostly big global crops for grains and the resulting bear markets. The stronger dollar and worries over demand from China have also impacted prices adversely. La Niña did not form last summer, as I predicted it wouldn’t. This helped set the stage for a record corn and soybean crop. But, what about now?
Will a La Nada or La Niña be present when we move into 2025?Could a bull market in grains eventually form?
The biggest bull weather markets over the last 2 years have been in cocoa and coffee brought on by Climate Change, deforestation, and a previous El Niño.
In the last three winters, a trader could have sold natural gas in December and potentially gain at least 20-35% on his/her money by March. Almost every winter of the last 5 years has been warmer than normal. What about now?
Our latest newsletter (download on top of the page) discusses the following:
1) The difference between an El Niño neutral (La Nada) and La Niña
2) How winter weather could be affected by both
3) What are the MJO index, and a negative PDO index?
4) How record-warm global temperatures could offset a potential cold signal for U.S. natural gas heating demand areas
5) What will it take for the Midwest grain areas and Plains wheat to have hot, dry weather next summer?
6) Why soybean prices may remain in a downward trend
7) How Climate Change has caused an explosion in cocoa prices
8) A discussion of the volatile coffee market and the impact of recent drought stress in Brazil
9) Australian crop weather
10) La Niña and a look at historical sugar prices
11) Trading ideas in commodities, and…
12) …Much more
Enjoy,
T H A N K S F O R Y O U R I N T E R E S T I N C O M M O D I T Y W E A T H E R !!!
Jim Roemer’s video (above) addresses these issues:
Following our bearish attitude in grains all summer long, and second guessing hot-dry Midwest weather models, why La Niña may finally arrive.
Harvest pressure could still cap rallies (later) in corn and soybeans, but growing weather problems for wheat could set the stage for a longer-term bull market. Could La Niña induce corn and soybean markets to rally, later?
How deforestation, La Niña and climate change are contributing to a severe drought in northern Brazil. Coffee futures, OJ and possibly sugar will be reacting to any weather forecast updates.
Why a record positive NAO summer could portend a warm early winter for the natural gas market.
If you were following our advice since summer, you know that we predicted (back in late June and early July), $9.50 soybeans and $3.80-$3.90 corn prices. What about now? How high could coffee prices go? What will be our trading ideas in natural gas and all Ag commodities? Subscribe to a 2 week free trial period to WeatherWealth (you can cancel at any time).
Jim Roemer, Scott Mathews, and The Weather Wealth Team
Mr. Roemer owns Best Weather Inc., offering weather-related blogs for commodity traders and farmers. He also is a co-founder of Climate Predict, a detailed long-range global weather forecast tool. As one of the first meteorologists to become an NFA registered Commodity Trading Advisor, he has worked with major hedge funds, Midwest farmers, and individual traders for over 35 years. With a special emphasis on interpreting market psychology, coupled with his short and long-term trend forecasting in grains, softs, and the energy markets, he established a unique standing among advisors in the commodity risk management industry.
by Jim Roemer – Meteorologist – Commodity Trading Advisor – Principal, Best Weather Inc. & Climate Predict – Publisher, Weather Wealth Newsletter
Weekend Report – August 23-25, 2024
To View Video > > > > > PLEASE CLICK BELOW
In this video, I talk about:
Why La Niña did not form this summer and how I predicted the bear market in grains last June
BestWeather Spiders: What are they and how to use them to trade everything from soybeans to coffee
Global Atmospheric Angular Momentum is finally turning negative: How this resulted in some short-term heat and dryness in parts of the Midwest grain belt. Will it last?
Northern Brazil’s drought and how it may affect OJ, sugar, and coffee production and prices.
West African dry weather is helping the cocoa market again. What’s in store, weatherwise?
See how we predicted $9.50 soybean prices and sub $4.00 corn, 2-3 months ago, what’s ahead for soft commodities, and more. You can also receive a 2-week free trial period
Thanks for your interest in commodity weather!
Jim Roemer, Scott Mathews, and The Weather Wealth Team
Mr. Roemer owns Best Weather Inc., offering weather-related blogs for commodity traders and farmers. He also is a co-founder of Climate Predict, a detailed long-range global weather forecast tool. As one of the first meteorologists to become an NFA registered Commodity Trading Advisor, he has worked with major hedge funds, Midwest farmers, and individual traders for over 35 years. With a special emphasis on interpreting market psychology, coupled with his short and long-term trend forecasting in grains, softs, and the energy markets, he established a unique standing among advisors in the commodity risk management industry.
Trading futures and options involves a significant risk of loss and is not suitable for everyone. Past performance is not necessarily indicative of future results.
On the date of publication, Jim Roemer did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
Most recently, since June,we’ve stated our opinion that “fading” ALL computer models that suggested La Niña would form later this summer. In addition, all these summer grain market bulls “completely missed the boat” as our clients were advised about a potential collapse in corn and soybeans, as early as mid June on perfect summer corn belt weather!
How did we do that? First of all … standard GFS and European models are “free to the public.” You get what you pay for: erroneous models which often cannot forecast the weather accurately more than a few days in advance.
My 40-year experience in “second-guessing” computer models and my understanding of market psychology comprise The Key.
We also offer our in-house long-range weather software that all subscribers can access. It is called ClimatePredict (www.climatepredict.com).
It performs analyses of the history and behavior of teleconnections and correlates agricultural commodity crop growing areas, while incorporating:
Arctic Sea Ice (or lack thereof);
Better prediction of El Niño or La Niña;
Ocean temperatures thousands of miles away,
Dozens of other phenomena, etc
Jim Roemer’s initial objective, back in June of $9.50 soybeans (from $11) and sub $4.00 corn, helped farmers hedge their production weeks ago and aided traders in adopting various futures and options strategies. In only a couple of months, one trade alone (just in grains) would have paid for my newsletter for several years.
We are finally seeing the signs of potentially the first weather scare of the summer for some hot-dry weather. Is it time to buy corn and soybeans? Are the markets oversold?
This installment, early last week, discussed the following:
1) Fading computer models all summer, predicting record corn and soybean yields for Midwest grain farmers and the bear market (back in June). Will prices for soybeans reach $9?
2) Best Weather Spiders: How to use them to trade Ag and natural gas commodities
3) Why the next big bull market may be in coffeeas extreme drought remains in Brazil & how recent coffee market volatility based on varying weather forecasts from the recent very light Brazil frost
4) Why our bearish outlook in sugar prices from 21 cents predicting a great Indian Monsoon has now been scaled back
5) Climate Predict: BestWeather’s in-house weather and crop production model for global commodities (free with an annual subscription to WeatherWealth)
6) Trade ideas from grains to soft commodities and natural gas
Thanks for your interest in commodity weather!
Jim Roemer, Scott Mathews, and The Weather Wealth Team
Mr. Roemer owns Best Weather Inc., offering weather-related blogs for commodity traders and farmers. He also is a co-founder of Climate Predict, a detailed long-range global weather forecast tool. As one of the first meteorologists to become an NFA registered Commodity Trading Advisor, he has worked with major hedge funds, Midwest farmers, and individual traders for over 35 years. With a special emphasis on interpreting market psychology, coupled with his short and long-term trend forecasting in grains, softs, and the energy markets, he established a unique standing among advisors in the commodity risk management industry.
Trading futures and options involves a significant risk of loss and is not suitable for everyone. Past performance is not necessarily indicative of future results.
HELPING YOU MAKE THE BEST INVESTMENT DECISIONS BASED ON THE WEATHER
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