“Meteorology’s MJO index: What it means and how it is affecting sugar and coffee prices”
by Jim Roemer – Meteorologist – Commodity Trading Advisor – Principal, Best Weather Inc. & Climate Predict – Publisher, Weather Wealth Newsletter
– May 14, 2024
The MJO index tracks an area of enhanced rainfall and storminess that travels around the global tropics every 30-60 days. It measures the strength and location of this propagating wave of cloud cover and precipitation. The MJO can have a significant impact on weather patterns across the globe by influencing the strength and location of the jet streams, formation of tropical cyclones, monsoon patterns, and development of El Niño and La Niña events.
Meteorologists closely monitor the MJO index because when the MJO is active, it provides better predictability of weather systems around two weeks in advance. A strong MJO signal over the Indian Ocean or western Pacific can increase the chances for tropical cyclone formation in those regions. Conversely, when the MJO is weak or incoherent, weather patterns tend to be more unpredictable at lead times beyond about a week.
The climatological effects of the MJO are especially relevant in Southeast Asia. For example, over the next two weeks or so, look how the rotation of this disturbance in what we call “phase 5” will bring important drought-easing rains to Vietnam coffee and Thailand sugar cane areas.
Of course, the U.S. dollar, Brazil’s Real, technical chart patterns, crop conditions in other countries, and the CFTC’s Commitments of Traders reports are all big factors for soft commodities. However, this little-known disturbance (MJO) is a background influence on the recent collapse in Robusta coffee (Vietnam production) prices and for sugar, as well.
Source: NOAA & WeatherWealth newsletter
Important rains coming to the Tropics may prevent a return of a soft commodity bull market
As one can see, drought stress has expanded and rainfall is critical to get the 2024 sugar cane and Robusta coffee crops off to a decent start.
Source: NOAA
Brazil is the largest sugar producer in the world. Currently, parts of Brazil’s sugar cane area are experiencing heat and dryness. This has benefited the nation’s upcoming huge harvest in 2024, however, it could threaten the 2025 crop. Presently, as the sugar chart illustrates below, traders and producers are comfortable with what could be a big rebound of sugar production in Thailand and India if the monsoon kicks in this summer.
Three weeks ago, we called for the end of the parabolic commodity hype in the cocoa market. In our newsletter we talked about parabolic markets and when to recognize they may be over and to sell into the bullish fever.
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.
“You can’t change the weather, but you can profit from it”
From historic flooding that has jeopardized southern Brazil’s soybean crop to a major freeze in parts of western Russia and northern Ukraine’s wheat area, the world’s weather has become more and more extreme. Do you think this is just the effect of a diving El Nino???
. . . Wrong !!!
The global heat content of the oceans has broken records set back hundreds of years (never observed before).
Now, with the USDA report out of the way, I will be monitoring the following, for WeatherWealth clients:
1) My Midwest drought easing forecast from a month ago:
a) Will this result in planting delays deeper into spring?
b) Could summer turn hot and dry?
2) Just how bad is the freeze situation for Russian wheat vs improving weather coming for Plains wheat with good rains?
3) Will the flooding in southern Brazil be enough to cause a bull market in old crop soybeans?
4) Does coffee, cotton or cocoa have upside potential this summer or autumn, due to a transition towards La Niña?
Currently, the atmosphere is still experiencing occasional weak El Niño conditions. This could bode well for the Midwest grain harvest this summer and benefit global cocoa crops following major weather and disease issues that launched cocoa into a parabolic trajectory that took futures to historic high levels.
One of the things we study at BestWeather is the correlation of commodity prices and cycles with weather and yields.
For example, take a look at the history of December corn prices since 2000.
Without going into too much detail, the red and green bars represent the months when December corn made its first and second highs. In other words, one can see that corn’s price often rallies during June, making its high, and then falls 70-80% of the time in July and August due to good Midwest pollination weather. Of course, there are exceptions, such as the summer droughts of 2011 and 2012.
Please join farmers, commodity investors, and hedgers around the world who want better weather information, and learn how one can relate it to the markets and trading. There is no obligation, you can cancel at any time.
You will also see some of my past reports and how clients may have made over $10,000 a contract by us catching the top of the cocoa market a few weeks ago and a bearish longer-term attitude last summer in corn and soybeans. Is this changing?
Here are the headlines of one of three reports this past week. Also, take a look at some of the photos of extreme weather this year, already.
Snows in Salt Lake City this winter… (First time, ever, that a soccer game was played in the snow)
The record-warm winter helped natural gas prices to collapse 50% this past winter (once again)
Historic western winter snows often bode well for Midwest corn and soybean crops for July and August.
Frost in Ukraine helped the wheat market rally earlier this week
Soybean market watchers will be keeping their eyes on more floods in southern Brazil vs Midwest planting and summer weather.
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.
“You can’t change the weather, but you can profit from it”
Why corn prices have not rallied in the face of disease issues and lower production in Argentina
The near-historic drought for Vietnam’s coffee & how we called this for clients more than a month ago
Why El Niño-neutral conditions (not La Niña) may persist through the North American summer. This will have implications for potential improved Plains wheat weather and good planting for corn
A look at global crop stress
If you haven’t done so already, please feel free to download a WeatherWealth issue we published two weeks ago:
“How to trade parabolic commodity moves and early season grain weather”here
There’s a new bull market in town other than cocoa, gold, silver, and most recently crude oil (Middle East tensions and stronger global demand). It is coffee. Our WeatherWealth newsletter https://www.bestweatherinc.com/membership-sign-up/ advised clients close to a month ago about a potential severe drought developing for Robusta Vietnam crop regions (similar to the lingering spring El Niño conditions in 2016).
In contrast to other firms suggesting La Niña will form this summer, we have disagreed. In fact, some computer models just came out agreeing with our feeling that occasional weak El Niño conditions will persist until at least June or July.
So… how does that influence global coffee weather? For one thing, it may turn too wet for parts of northern Brazil’s coffee, following earlier heat and dryness in December-January. This was related.
Not only due to El Niño but also to deforestation in the Amazon and climate change.
Source: EPA.GOV
However, of even greater concern is the continuation of record levels of tight Robusta coffee supplies. Irrigation levels are extremely low. Combine this with nearly record April heat (map below) and a pesky high-pressure ridge, and one can see why Robusta prices are testing historic high levels.
Another parabolic commodity move, similar to cocoa as the planet continues to warm
Consequently, will I change my forecast to more rain and a bearish outlook? How does one use coffee spreads, futures, or options to potentially capitalize on the lingering El Niño? That is where WeatherWealth comes in. Please feel free to click on the link at the top of the page for a 2-week free trial period covering all Ag and natural gas markets. You will also receive my BestWeather Spiders with trade sentiment for a dozen commodity products… for example: Robusta coffee advised a month ago.
The temperature index score is now very bullish at a +4 with record heat in Vietnam. This makes the total score very bullish at at least a +9.
by Jim Roemer – Meteorologist – Commodity Trading Advisor – Principal, Best Weather Inc. & Climate Predict – Publisher, Weather Wealth Newsletter
Thursday Evening Weekend Report – March 28-31, 2024
Worried about losing one second of time? The melting Polar Vortex is not only creating more and more of a warming planet, but is also speeding up the Earth.
My video (above) addresses how I predicted another warm winter, the collapse in natural gas prices and which analog years might be helpful to predict summer grain markets and crops. Enjoy!
Anyway, in the next couple of years, we’ll all lose one second from our day. It may not seem like much, but this tiny adjustment to our clocks is being impacted by the massive melting of polar ice due to climate change.
The length of our days is determined by the Earth’s rotation speed. As that spin gradually changes based on shifts in the planet’s surface and molten core, we occasionally need to add or subtract a “leap second” to stay in sync.
Source:NOAA
While we’ve added plenty of extra seconds over time as the rotation slowed, the Earth is now speeding up again. For the first time ever, we’ll need to remove a second instead of adding one. But, the unprecedented removal could create unforeseen issues for computing systems used to only adding time.
The kicker? This leap second subtraction was originally forecasted for 2026, based on the accelerating spin. However, the study shows the melting ice caps are enough to delay that milestone day of lost time all the way until 2029. A tiny difference, but one more stark reminder of the profound impact human-caused global warming has on the fundamental systems that govern our world.
In just a couple years, we’ll actually need to remove a second from our clocks – something that’s never been done before. And the surprising reason? Human-caused polar ice melt.
While the slowing effect of tides has dominated Earth’s rotation changes historically, the melting ice sheets are now a major factor speeding up our planet’s spin. As that ice shifts from the poles towards the equator, it’s causing the entire Earth to rotate faster, like a figure skater pulling in their arms.
However, another force in the planet’s core is outweighing even the ice melt acceleration right now. We don’t fully understand these mysterious core processes 1,800 miles below, but they are inexplicably spinning up the solid outer shell independent of the liquid core’s motion.
The net result is an increasingly sped-up rotation requiring that unprecedented “leap second” subtraction soon, (likely in 2026) according to the study. It’s a seemingly minuscule adjustment, but one with huge implications for things like stock exchanges and computing systems only designed to add time, never remove it.
To me, it’s simply astounding that human activities like burning fossil fuels have now measurably altered something as fundamental as the literal spin of our entire planet on its axis. A stark reminder of our growing impacts.
When it comes to commodities, One of the impacts has of course been the collapse in natural gas prices once again. Selling natural gas in the fall and getting out in the early spring has worked “almost every time” the last few years. My Spider, which was firmly bearish at a -8 back in December, is a bit more neutral now at these prices, but I see nothing to get excited about in this market given such massive global supplies
As we head towards the spring and summer weather markets in grains and soft commodities, find out how to trade better, get a jump ahead of other weather forecast firms, with a 2-week free trial period to WeatherWealth, here:
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?
HELPING YOU MAKE THE BEST INVESTMENT DECISIONS BASED ON THE WEATHER
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