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 El Niño-driven bull markets in cocoa and sugar
Two bull markets in soft commodities have been in cocoa and sugar brought on by a variety of summer weather problems from India to Thailand and West Africa.
My cocoa Spider, featured in my WeatherWealth newsletter for about 8 commodities each week, has been basically bullish cocoa since summer. Sometimes it has gone neutral, but overall, we have developed long-term bullish call option spread ideas for summer.
Wet November weather could further compromise cocoa and sugar crops
This time of the year, dry weather is needed for the sugarcane harvest in Thailand (the #3 producer) and in the Ivory Coast and Ghana (top cocoa producers) where the incessant wet weather has caused disease issues all year.
Usually, El Niño can bring wet weather for Thailand in November but typically it dries out in West Africa for the remaining main crop harvest. One such El Niño year that was super wet in Thailand was 1987. The fact that West Africa has remained wet is atypical of El Niño and more so due to warming oceans and Climate Change.
Wet weather in Thailand during November can negatively impact the sugar crop for a few key reasons:
Flooding – Heavy November rains in Thailand bring a higher risk of flooding, which damages sugarcane fields and disrupts harvesting.
Cloud cover – Increased cloud cover and reduced sunlight slows sugarcane growth during this critical time before the harvest. Photosynthesis is diminished.
Disease – Wet conditions promote fungal diseases like red rot, which damages stems and leads to sugar content loss.
Delayed harvest – Excess soil moisture makes it harder to operate harvesting equipment on muddy fields. This can delay crop collection.
Diluted sucrose – High rainfall right before harvest dilutes the sucrose concentration in stalks, reducing sugar content.
Crop loss – Severe floods from monsoons can completely submerge and destroy portions of the sugarcane crop.
Overall, wetter than normal November weather reduces both the quantity and quality of sugarcane yields in Thailand. Dry conditions are needed for optimal sucrose development and timely harvest. Excessive rain has a very detrimental impact on both yields and sugar content for the Thai sugar industry in the critical pre-harvest period.
While adequate rainfall is crucial for cocoa production in Ivory Coast and Ghana, excessive wet weather over months can cause major issues:
Prolonged heavy rains increase the prevalence of fungal diseases like black pod rot and myriads. These have caused severe damage to cocoa crops recently in very wet conditions.
Overly wet soil makes bean harvesting and drying more difficult. This can delay and disrupt cocoa harvest operations.
Persistent moisture also promotes canker and algal bark diseases which damage cocoa tree health and yields.
Flooding from heavy rainfall can rot the roots, asphyxiate trees, and reduce yields.
So while November rains are important for cocoa pod development, too much rainfall over consecutive months promotes crop diseases, hampers harvest logistics, and reduces bean quality.
This video (click above) talks about the Amazon rain forest, the teleconnections that will influence November weather, and how heavy rains and flooding in parts of central and southern Brazil are impacting soybean planting, and the sugar cane harvest but benefitting coffee trees.
The El Nino-driven bull market in sugar began last spring. Prices have soared more than 30% because of a combination of drought in India and Thailand, and higher crude oil prices. This price surge is more than any other agricultural commodity.
Currently, as my weather maps show, heavy rains hitting Brazil and Thailand will delay their harvest. This may add to the “squeeze situation” occurring in this market.
My Best Weather spider is in the “cautiously” bullish camp in sugar. We look at all fundamentals, technicals as well as trader psychology from natural gas to grains and all soft commodities. Feel free to receive a 2-week TRIAL period to WeatherWealth.
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