African dust, the Harmattan Wind, and how I called the unprecedented explosion in cocoa prices three weeks ago.
Why El Niño has strengthened recently: Potential impacts for grain prices and the Midwest summer
Why record-warm global oceans have thwarted any bull move in natural gas prices
A look at potential late February and March weather
Join farmers, traders, and investors on six continents who have benefited from a seasoned meteorologist’s 38 years of experience as he second-guesses standard computer models. What is the next big trade in Ag commodities? Is it too late to buy cocoa and go short the grains?
This video addresses the climatic factors that are causing an unprecedented price move in cocoa and what will bring drought-easing rains to Plains wheat — Enjoy!
Our BestWeather Spider became bullish more than a week ago, catching this historic move up in prices on new concerns about a dry, dusty wind in West Africa called the “Harmattan.” However, at these price levels, the only way to trade cocoa is by using sophisticated strategies in options and spreads, as we already had the move I expected.
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.
(Our video from last week addresses why we reversed our bullish attitude in natural gas early this past week and enumerates the implications for South American grain weather.) It’s a bit too late to sell natural gas in the hole now, especially with a potential friendly EIA number later this week.
El Niño usually brings big crops to Argentina
It is common knowledge that more than 80% of the time, El Niño brings above the normal corn and soybean yields in Argentina and southern Brazil, but can often bring dryness and reduced crops in northern Brazil. This certainly happened earlier this winter (South American summer) with drought hurting Matto Grosso soybean yields. Nevertheless, we had been in the bearish camp for weeks in soybeans due to worries over the Chinese economy and our earlier forecast that South American weather and crop conditions would improve.
Click on this image In the above video, I cover the following:
A) Why late January and February heat and dryness in Argentina is unusual during El Niño but some problems may develop from excessive heat;
B) How teleconnections such as the MJO and AO index can affect South American corn and soybean weather in February and offset typical ideal “El Niño type” weather (too wet at times for the northern Brazil soybean harvest and some potential minor issues resulting from hot and dry in Argentina);
C) How we warned clients of a top in the natural gas market by predicting a +AO index;
D) How the Red Sea tensions have helped markets such as Robusta coffee and cocoa soar. These two markets already have had tight supplies due to El Niño-related crop problems (Brazil coffee weather will continue to improve vs. some previous crop reduction issues);
E) If February is hot and dry in Argentina, this might suggest that the 1987-88 El Niño analog could hold, suggesting the potential for summer Midwest weather problems affecting corn and soybeans (right now we are not calling for this, but something to watch).
f you have not yet had a complimentary trial to WeatherWealth, please request one, and join farmers, ETF investors, and futures traders on six continents and those who just want better (more accurate) short and long-range weather forecasts, often before markets react. While past performance is not indicative of future results, calling the $1 collapse in soybeans the last 6 weeks and the recent huge weather market natural gas volatility pays for the newsletter for years in just a matter of weeks.
This video pinpoints the climatic variables responsible for the coldest U.S. weather in years. Frequent snowstorms will also occur. The good news is that some easing of the cold will occur by late January.
A negative NAO index has to do with a warm block near Greenland. (please watch my video —it explains how this is affecting commodities)
SNOWFALL PROJECTIONS NEXT 2 WEEKS (INCHES): A negative NAO will bring many areas in red and white over 1-2 feet of snow from at least 2 major storms. The most snowfall in several years
The opposite is happening over the South Pole (Antarctica), there has been a positive AAO index. This means the vortex stays put and does not move north. Combined with El Niño, this has brought improved weather for South American soybeans, something I alerted all my WeatherWealth subscribers about, three weeks ago.
Only 4 or 5 El Niño events have seen a powerful negative NAO index in January. Most of these years saw El Niño weaken by the spring or summer. Based on this scenario, this will be very important for many agricultural markets, and I will be developing trading strategies in options, futures, and ETFs.
How a negative NAO (warm block over Greenland that forces the Polar Vortex south) affects commodities:
1)Energy/Natural Gas: Coldest weather in at least 2-3 winters coming for Europe and the U.S. starting next week
2) Wheat: Isolated areas of winterkill in Russia and possibly Nebraska and big cold and snows for the southern Plains and Midwest. It will be important to monitor snowfall.
3) Cocoa: While I was bullish all summer and autumn long on major wet weather and disease issues, the lack of a Harmattan Wind in Ivory Coast and Ghana could prevent any further damage to the cocoa crop
How does a positive AAO index (The vortex that remains over Antarctica and does not move north) affect commodities?
1) Soybeans/Corn: Easing of the northern Brazil drought and potential big Argentina crops
2) Coffee: A hot November and early December likely will lower Brazil’s coffee production by several million bags, but improved rainfall is on the horizon that will stop further damage.
Join farmers and traders worldwide who want an advantage in trading agricultural and energy futures with over 100 issues a year of WeatherWealth with frequent weather updates and trading ideas. Download a recent complimentary issue here about El Nino https://www.bestweatherinc.com/new-membership-options/
This free report below was written three weeks ago before we changed the weather forecast for natural gas and energy markets)