There is a little tropical wave called the MJO that for many years was not taken into account by meteorologists, or many global forecast models. In recent years, these storm impulses have become much more precocious in the minds of many weather forecasters. I believe that because increasing warming oceans, brought on by global warming, that these systems are stronger than they once were and can, at times, alter conventional methods of weather forecasting.
The further the MJO is away from the center of this map, the stronger it is. It is currently moving across the western Pacific and by early November will be moving closer to west Africa. The strong MJO this fall, combined with a warm Atlantic and developing weak La Nina, were key ingredients for an active hurricane season this year.
MJO Phases
The movement of the MJO can also affect the global jet stream pattern.
The natural gas market has taken notice for the colder early November weather, something we alerted clients about last week, that models were not cold enough. You can see the red (warm) ridge out west that will aggravate the brush fires and the colder Midwest and Eastern weather that may bring about some snows. This has been the reason natural gas prices have rallied a bit. But will it last for winter? Only paid customers will know that answer: subscriptionsbestweather@gmail.com
La Nina
What about La Nina? NOAA and many others are talking about a warm winter and often it makes sense to fade the crowd. Where the MJO migrates to for the rest of the winter and how strong La Nina becomes will have huge impacts in the natural gas and heating oil market in the months ahead.
For the time being, here are the typical rainfall patterns associated with La Nina. For example, the developing wet weather in N. Brazil has put pressure on coffee prices lately as Brazil could harvest a huge crop. However, Argentina sometimes becomes too dry for corn and soybean crops heading into December (a critical time of the year for early germination and development for grains).
Traders will be watching closely for these developments, as there are other teleconnections that I see, that may not be as detrimental to some grain crops, as other firms suggest. Corn and soybeans will have huge swings on winter (South American summer) weather in the weeks and months ahead. Typically during La Nina, west African cocoa crops benefit and is a bearish influence eventually, while U.S. plains wheat weather is dry in the winter and spring. If this happens, then the 5-6 year bear market in wheat, may come to an end before or by next spring.
The east coast is experiencing a nice, warm start to autumn. Temperatures will be in the lower 80s for most of New England this weekend. This will be the last chance to catch some rays on the beach! Warm weather has occured over the past week for most of the country. See the temperature anomalies below:
Natural gas traders have been following the warm forecasts closely. Prices began to rise from nearby lows on September 11th. Forecasts accurately showed a strong ridge over most of the country. Warm temperatures cause above normal cooling demand, leading to greater natural gas consumption. Prices have since ‘cooled off’ from the highs, given the latest forecast of more seasonable weather in the 11-15 day range.
Over the next week, above normal temperatures are expected for the eastern half of the country. After that, below normal temperatures are forecasted.
Will the abnormal warm weather really give way to cooler temps as models suggest? How will natural gas react? For information about how to trade weather in the natural gas market and the ‘best’ long range forecasts available, email subscriptionsbestweather@gmail.com.
Another fundamental factor affecting the market is the current storage compared to previous years. Current levels are much lower than at this time last year. We are more similar to 2015 and 2013. The October and November weather will determine where we end the injection season.
Photo Credit Judy Gaines: check out her website here The picture above shows leaves wilting on coffee trees in Brazil prior to the main bloom that begins in October. In the coffee areas, there were several droughts over the last 30 years during the critical October-December period. The most severe drought in that time frame occurred in 1985 when coffee prices rallied 80%. We will also monitor certain weather issues in Indonesia and Colombia. This enables us to build an overall longer term view of South American coffee production and price potential. This type of analysis is only available to paid subscribers.
December coffee futures have bounced nearly 15 cents from the early September lows. The buying flurry is a result of the dry weather seen in the early development of the coffee crop. Prices have remained in the $1.20-$1.50 range since May. See the December contract prices below (Credit Barchart)
Lack of Rainfall
June is the peak of the dry season in Minas Gerias, Brazil’s greatest coffee producing state. Typically, rains start to pick up in September, on their way to a peak in December. However, 2017 has been stingy. Most areas have received 50-150 mm (2-6 in) less than average. The past 30 days of rainfall in the four major states outlined in the graph indicate poor conditions occurring over all areas.
This is an ‘on-year’ for Brazil coffee, with a massive crop expected. These hopes aren’t ruined yet, but rainfall is definitely needed over the next 2-6 weeks. The latest GFS forecast does not look beneficial for coffee in the 7 day outlook. Very little rainfall is expected. What about in the following weeks? Only paid subscribers will receive updates on if rejuvenating rains will occur, impacting prices.
MJO Moving to Phase 8 and Weak La Niña Signal. Will It Break Brazil Dryness?
The Madden-Julian Oscillation (MJO) is a tropical disturbance that propagates eastward around the global tropics with a cycle on the order of 30-60 days. The MJO has wide ranging impacts on the patterns of tropical and extratropical precipitation, atmospheric circulation, and surface temperature around the global tropics and subtropics. There is evidence that the MJO influences the ENSO cycle. It does not cause El Niño or La Niña, but can contribute to the speed of development and intensity of El Niño and La Niña episodes.
The MJO (below) may be moving into a wetter Brazilian phase by October that could ease the Brazil dryness and if it does, break coffee futures. However, our unique Climatech Program can forecast weather months in advance and has been used recently to predict the very active hurricane season and many major moves in commodities. Will the dryness in Brazil break the coffee market if rains fall? Email us at subscriptionsbestweather@gmail.com for information about our services. –Jim Roemer
Hear the latest from Jim Roemer on Irma, markets and more: Already, many commodities from lumber to orange juice and cotton are beginning to move up on the “psychology” of Irma, but how long this will last is only reserved for our present clients. Many stocks, however are benefitting from Irma’s wrath. That information is available to newsletter subscribers.
Since the 1950’s, some parts of Florida have experienced as much as 12” of sea level rise and another several feet is expected over the next 100 years.
Watch this video (below) about about Sea Level Rise. If unable to view, see link here.
MIAMI
I was driving through Miami a few months ago and found out they have sunny day flooding. There was water in the streets up to the window of my car. Sunny day flooding (without any influence of high tide or a hurricane) is a distinct signal that the oceans are rising. Glaciers and icebergs are melting and flooding will adversely affect hundreds of millions of people. This could occur globally over the next number of years. We must reduce global carbon emissions. Pulling out of the Paris Climate Agreement is absolutely ludicrous. Clean energy is the solution longer term.
South Florida is at a risk of storm surge from Irma. But hopefully, the deep water off shore will help limit the storm surge height. This is because the amount of water the hurricane piles up can flow downward into the deep ocean instead of getting piled up on land. See image above. However, across Georgia and southern South Carolina, the surge can be as high as 20 feet. I expect by the time Irma heads closer to Georgia, it will be closer to a category 3. If Irma stays a bit further east into the open water and not a direct hit over southeastern Florida, more devastating effects will be felt further north and Irma could be a cat 4 when moves near Georgia. —Jim Roemer
Harvey came ashore near Rockport, TX as a category 4 hurricane, with 130 mph winds; but, the worst flooding has yet to come. More than two feet of rain has fallen, so far, over most of the Houston metro area. News footage of flooded neighborhoods and life saving water rescues have been heartbreaking. Unfortunately, there could be another 10″-15″ on the way for parts of Houston. The image below shows the latest NAM model forecast of additional rain:
Why will the rain continue? The path of Harvey tracks back to a more favorable location: the Gulf of Mexico. In that larger body of water, the warm moist air is more conducive for a storm to regain power. The low will strengthen and pick up moisture starting late today into Tuesday night. A second landfall will occur sometime on Wednesday.
What stocks/futures were impacted?
We created a table of current market impacts from Harvey. Generac (GNRC) produces commercial and residential generators. Home Depot (HD), Lowes (LOW) and Lumber Liquidators (LL) are retailers that have significant market share in home improvement goods. The remainder of the table include futures and stocks related to energy and cotton.
Parts of the energy sector have reacted differently to the aftermath of Harvey’s wrath. Natural gas and oil rigs can sustain 60 ft waves and category 5 hurricanes, limiting any damage. Natural gas futures are up today, as offline production is more than anticipated (production below 71 bcf/day). Although 105 out of the 737 manned platforms in the Gulf were evacuated, production should resume immediately once conditions improve. Gasoline (RBOB) refineries are another story. S&P Global Platts estimated that we are losing 2.2 million barrels per day from refinery shutdowns. Due to impassable roads, any permanent damage to infrastructure remains unknown. October RBOB futures prices have risen ~6% from last Wednesday’s opening to today’s. For more information on how Harvey will continue to impact the energy market, please email us at subscriptionsbestweather@gmail.com.
Cotton & Harvey
Cotton is another market that traders have been monitoring for Harvey related opportunities. When cotton bolls are open, heavy rainfall can knock off the fibers. There is also some concern of flooding in some of the storage facilities. However, only about 14% of Texas cotton grows in the southeast part of the state, and this amounts to only 5% of the total US cotton production. In order to impact the nation’s supply/demand equation, there would have to be crop damage in the areas up the Mississippi river. The image below shows the European forecast from last Friday with cotton growing areas highlighted:
HELPING YOU MAKE THE BEST INVESTMENT DECISIONS BASED ON THE WEATHER
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