As El Niño transitions to a neutral phase during the summer, sugar prices typically experience a downward trend due to several factors:
Improved weather conditions: The end of El Niño often leads to more favorable weather patterns for sugar-producing regions, particularly in major exporting countries like Brazil, India, and Thailand.
Increased production: With the return of normal weather patterns, sugar production tends to recover in countries affected by El Niño-induced droughts or excessive rainfall. This increased supply puts downward pressure on prices.
Market correction: Due to supply concerns, sugar prices often spike during El Niño years. As these concerns dissipate with the transition to neutral conditions, prices typically adjust downward to reflect the improved supply situation.
Stockpile replenishment: Countries and traders often take advantage of the improved production and lower prices to replenish their sugar inventories, which can temporarily support prices before leading to a more balanced market.
Other factors affecting sugar prices
It’s important to remember that sugar prices are not solely influenced by El Niño or La Niña alone. There are a few other factors that can play a big role:
Global demand: If people start consuming more or less sugar, or if the global economy shifts, it can impact sugar prices.
Government policies: The availability of sugar in the market can be affected by government policies, such as restrictions on sugar exports or changes to biofuel mandates.
Crop estimates: When new estimates are released about the expected production of major sugar producers, it can affect market sentiment and prices.
Crude oil prices: Higher crude oil prices can “sometimes” mean that Brazil producers convert more sugar cane to Ethanol to lower high energy cost risks. This lowers actually sugar cane production that can hit the market.
So, while prices generally tend to stabilize as El Niño ends, the exact changes in price can vary based on these other factors. I keep a close eye on weather patterns, production forecasts, and policy changes to predict where sugar prices might head next.
My Weather Spider helps gauge market direction for all ag markets and natural gas in my WeatherWealth newsletter.
Look at the Indian Monsoon and the recent weather in Thailand
Generally, normal rainfall for key India sugar cane areas and a bigger crop in Thailand this year, combined with the weaker Brazil Real are bearish for sugar prices.
India’s monsoon picking up has pressured sugar, as I suggested to Weather Wealth subscribers last week, and I have developed longer term option strategies for these clients.
Source: ClimatePredict: Jim Roemer’s long-range weather forecast software
Find out how we recently called for the collapse in grain prices with specific profitable options and futures strategies for farmers and traders on six continents.
What is our feeling about coffee prices from here?
How severe has the heat and dryness been in Brazil?
We will help you receive better weather forecasts and with trading ideas.
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.
This video below talks about the following from July 5th:
How Hurricane Beryl may affect commodity markets (this is old news now)
Why it has been coffee most adversely affected by a warming planet
The potential for a bull market in grains later? Possibly, but our overall bias for weeks has been “against the crowd” predicting doom and gloom for U.S. grain crops. For now, the delay of La Niña has prevented any major widespread weather problems for corn and soybeans, other than a few isolated areas
Why traders were wrong being bullish natural gas over $3.00 a few weeks ago
Click above and also feel free to join my YouTube channel
OVERALL BEARISH VIEW IN CORN AND SOYBEANS INTO JULY
by Jim Roemer – Meteorologist – Commodity Trading Advisor – Principal, Best Weather Inc. & Climate Predict – Publisher, Weather Wealth Newsletter
Wednesday Evening Report: June 26, 2024
Friday’s USDA planted acreage report has been known to throw “shockers” into the grain trade. For example, last year’s June 30th acreage report resulted in a surprise drop in soybean acreage and a modest increase in corn acreage. The result? The outcome is usually a major upward move in soybean prices and a collapse in corn prices.
Historically, however, traders turn their attention back to Midwest weather, which right now is ideal, other than flooding in the northwest corn belt. This flooding from the Dakotas, northern Iowa, and Minnesota will NOT be taken into account in this week’s report.
In the past two weeks, it has been our opinion that all of the chatter of hot-dry Midwest weather is HOGWASH because of this warming over Alaska called the negative Eastern Pacific Oscillation Index.
I alerted clients a few days ago about cooler weather. This also pressured natural gas, not just corn and soybeans.
Source: Weather Wealth Newsletter
But… could things change after July 6th?
Could there be a bull market in corn and soybeans later?
We’re offering our valued readers a COMPLIMENTARY ISSUE OF WEATHERWEALTH titled:
”A gift horse named “cocoa.” The collapse in corn and soybeans & historical USDA late June planting reports”
1) A look at recent rainfall maps in the corn belt and why the grain market has not yet gotten excited about potential hot weather deeper in June or early July;
2) Rainfall forecast for the next 10 days. Some flooding and severe weather are possible in the northwest corn belt. Will this cause some replanting of corn over to soybeans?
3) Strong El Niño events… How often did they transition to La Niña?
4) Why El Niño neutral conditions should exist through at least August.What does this mean? Weather and market volatility with a fluctuating SOI index;
5) Mexico’s record heat and drought. Indications for July temperatures?
6) A look at soft commodities and market action for orange juice, coffee, and sugar;
7) What does another record-warm winter suggest for summer temperatures? Are sunspots to blame?
Please feel free to download a complimentary past issue of WeatherWealth if you have not done so before.
Extreme heat in much of the deep south and west is beginning to create a new bull market in natural gas, but what about corn and soybeans? Right now, my biggest concern is for flooding in the NW corn belt that may mean a switch from some corn to soybean acreage. The potential also exists for some heat heading into July.
Back in April, our forecast for drought-easing Midwest rains, combined with terrible demand, helped pressure grains sharply. This collapse may be surprising in the face of lower and lower Russian wheat crop yields and damaged South American corn and soybean production. However, it will take consistent heat and dryness later to foster a new bull market in corn and soybeans.
Could this happen? Perhaps. In my view, occasional weak El Niño conditions are holding on. I predict a hot July for parts of the Midwest corn belt based on what I’m seeing about the global climate, as per the maps below. The key factors are record flood levels coming to Florida combined with a warm signal from a NINO4 and a negative PDO.
1) Solar Activity:
My point of view : T h e r e is z e r o c o r r e l a t i o n b e t w e e n s u n s p o t c y c l e s a n d gl o b a l w e a t h e r.
Perhaps, 50-100 years ago that might have been the case… but not today, with record global ocean warming brought on by man-made influences. Do you think that all of these record-warm years are cyclical and due to the sun? Guess again… NO! The chart below shows how the planet has warmed since the 1880s whether solar activity (yellow line) was high or low.
2) Similar teleconnections and a look at July rainfall trends
The negative PDO in the Pacific, along with warming and an El Niño signal east of Australia (NINO4 region), combined with cooling near Peru (La Niña signal) has only happened simultaneously in two years since 1950. Depending on how these teleconnections fluctuate in the next few weeks, may result in a dry July in parts of the corn belt and take the bearishness out of the grain market.
3) Signs El Niño/La Niña conditions are going back and forth
Volatile global weather patterns have N O T H I N G to do with solar cycles but everything to do with record-warm global oceans and the oscillation of El Niño/La Niña among other teleconnections.
My program is available for all WeatherWealth subscribers. The purpose is to apply weather forecasts to predictions about market trends for agricultural and energy commodities.
Shown below are the incredible rains that hit Florida: more typical of El Niño lingering than La Niña
Will we enter a new bull market in corn and soybeans? For natural gas, we became bullish last week. Please feel free to download a recent complimentary sample issue of our newsletter here, or join farmers and traders around the world who want a much better edge trading commodities on the weather, with a 2-week free trial to WeatherWealth
The seasonality in natural gas prices and why the market collapsed 15% the last week
Why some late-season moisture from Nebraska to Kansas/Oklahoma and some rains in Ukraine pressured wheat prices
Weakening El Niño events and possible implications for weather in the corn belt
Why late spring crop prospects are looking excellent in most places resulting in a new bear market in corn
Get better updated weather forecasts second guessing standard computer models for the summer grain and natural gas markets, plus trading ideas from a 40-year veteran. https://www.bestweatherinc.com/new-membership-options/
Enjoy!
Thanks for your interest in commodity weather!
Jim Roemer, Scott Mathews, and The Weather Wealth Team
Please feel free to learn about Jim Roemer, our track record, and how we use weather to help traders, hedgers, and investors. If you have any questions, please don’t hesitate to drop me a line – Scott Mathews, Editor
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. There is no warranty or representation that accounts following any trading program will be profitable.
HELPING YOU MAKE THE BEST INVESTMENT DECISIONS BASED ON THE WEATHER
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