“The record summer +NAO index and its impact on the weak hurricane season and commodities”
by Jim Roemer – Meteorologist – Commodity Trading Advisor – Principal, Best Weather Inc. & Climate Predict – Publisher, Weather Wealth Newsletter
Weekend Report – September 6-8, 2024
Background of the NAO index and its potential i& influence on the Atlantic hurricane season
The NAO (North Atlantic Oscillation Index) is one of the most important teleconnections to predict winter weather for the natural gas market. It has to do with how surface pressures fare over Greenland and the Azores to the west of Africa. When the NAO is negative in winter, this means high pressure over Greenland that can sometimes bring onslaughts of cold winter weather to Europe and/or the U.S.
However, the positive NAO index also helped us predict record midwest summer grain crops for corn and soybeans and will have implications for soft commodities in the months ahead.The record-warm Arctic combined with mostly a positive NAO index (low pressure off Greenland and high pressure over the Azores) has resulted in several warm winters in a row.
A trader could have sold natural gas at some point in time in November or December in each of the last three to four years and made 30-50% on his/her money by March.
Anyway, the NAO index also has some influence on U.S. summer grain weather and soft commodities, as well as repercussions for the Atlantic hurricane season. Models have been overzealous, forecasting potential hurricanes due to all this African dust you see in the image below.
Nevertheless, storms that “originate” in the Gulf are often not affected by African dust–just waves coming off the coast of West Africa. Near record warm ocean temps could result in rapid intensification of a tropical storm early this week in the Gulf. However, no immediate major hurricane is expected.
Shown below are four graphic images I put together:
(upper left) A negative NAO indexresults in below-average African dust and often an active Atlantic hurricane season when an “El Niño neutral” or La Niña is present.
(lower left) The NAO indexhas hit arecord high this summer at 3.15
(upper right) The correlation of a +NAO (shown on my weather forecast program ClimatePredict) depicts thattotal Atlantic Cyclone Energy and the number of strong storms are below normal. This is in contrast to NOAA as well as many other entities out there who wrongly predicted a few months ago, one of the strongest hurricane seasons on record.
(lower right) Low pressure over Greenland responsible for the +NAO
How can the NAO index give clues about commodity weather?
Take a look at the correlation for September rainfall over northern Brazil when the NAO is positive. There is a negative correlation with rainfall. This implies the severe drought continuing for key Brazilian sugar cane crops, coffee, and orange production areas. OJ prices are making all-time highs on the combination of Florida’s lowest crop in decades, and also a 25% reduction in Brazil’s 2024 crop. The 2025 crop may see more of the same.
Soybean traders will also be watching Brazil’s planting weather in another few weeks or so. A severe drought is unusual if La Niña forms in northern Brazil, but deforestation of the Amazon is offsetting some standard climatological signals.
Of course, the NAO is only one of many teleconnections. See how my program has 28 of them. These helped me “second guess” standard computer models last June in predicting that La Niña would not form this summer and the Midwest would have huge corn and soybean crops.
What is my forecast for the important October coffee bloom in Brazil?
When, if at all, will the sugar market begin to respond to the drought?
Which trading strategies am I employing in futures or options for WeatherWealth clients?
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.
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.
“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
HELPING YOU MAKE THE BEST INVESTMENT DECISIONS BASED ON THE WEATHER
We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it.OkPrivacy policy
