Where are crop stress areas around the world adding to food inflation?

Where are crop stress areas around the world adding to food inflation?

Last week, the stronger U.S. dollar and some important rains for Plains wheat areas initially helped to pressure wheat prices during recent trading sessions through to Monday. However, a lot more rain is needed in the Plains to offset poor wheat crop conditions. In addition, new weather problems in India (and potentially in Europe) have led wheat futures to snap back up.

Source: Jim Roemer’s Weather Wealth newsletter

Indian Wheat is hurt but usually not a major market factor

There has been some talk that India may cut off its wheat exports. In part, this is due to record heat and worsening Indian crop prospects. It is too early, however, to write off the 2022 cotton and sugar crop that is much more sensitive to summer weather. Stay tuned.  Normally, weather problems in India to wheat are NOT a market factor. However, with such tight global stocks and the Russia-Ukraine war, there is no room for error this year.

A farmer cools down in Punjab during a blistering heatwave that has scorched wheat fields
Source: Bloomberg
Source: Reuters (story by Robinson Meyer, photo – Getty Images)

Europe dryness needs to be watched for wheat

EUROPE RAINFALL in the PAST TWO MONTH

  • Dryness has been developing (red)
  • Rainfall will be critical for European wheat yields in the next two months.

Source: WeatherBELL

A look at current global crop prospects vs. a year ago:

  • 1) Crop ratings for Plains wheat are much worse than last year.
  • 2) Europe wheat crop potential looks a bit worse over 30-50% of the area.
  • 3) West African cocoa seems about the same as last year with no big concerns.
  • 4) Indian dryness haunts their wheat crop and is much worse. The monsoon will not be important for the cotton and sugar market till summer.
  • 5) Too much rain in parts of Australia is good for the long term. However, this brings some issues for potential planting or early germination.
  • 6) Parts of northern Brazil’s coffee areas are too dry, again. This would have been much more bullish 3-6 months ago when ample rains fell.
  • 7) Prices of cotton are in an inflationary spiral; there may be added woes from the Texas drought and too much wetness in the deep southern U.S.
  • 8) While corn planting delays have caused some concern, overall, 70% of the belt will benefit from wet weather and warmer temperatures.
     
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SOURCE: Jim Roemer WWW.BESTWEATHERINC.COM
  • How does one trade these weather extremes with commodity options, futures, or ETFs?
  • What should farmers and traders expect with this second year of La Nina lasting through summer?
  • Will these weather concerns last? Because if so, because of La Nina and Climate Change, food inflation will continue to soar

That is where we come in at Weather Wealth, advising traders and farmers on six continents. Feel free to download a past monthly newsletter from last autumn here: https://www.bestweatherinc.com/climatelligence-newsletter/ 

This issue was entitled  “The Squeeze in Commodities”

Thanks for your interest in commodity weather!

Jim Roemer

Mr. Roemer owns Best Weather Inc., offering weather-related blogs for commodity traders and farmers. For a two week complimentary trial to the Weather Wealth blog, including short/long term forecasts and trading ideas, please visit https://www.bestweatherinc.com/ 

He also is 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.

Weather Issues Return For Some Global Coffee Areas

Weather Issues Return For Some Global Coffee Areas

I had been in the bearish in coffee prices most of this winter (Brazil summer. My earlier sentiment was due not only to consumer demand worries from the Russian-Ukraine War and risidual concerns about COVID, but because I forecasted the northern Brazil drought to break, last October. Indeed crop prospects have improved for Brazil coffee following frosts and droughts last year.

I mentioned weeks ago to my Weather Wealth clients to sell call options when coffee prices were in the $2.30-$2.50 range. However, I alerted clients earlier this week to potential problems areas for both Colombia coffee and Brazil that might foster a rally again in coffee prices.

Here is a chart “Phenological Chartacterization Of Coffee Deveopment In Brazil” . Excellent October-December rainfall in Brazil aided the bloom and development stage of coffee. Presently, the coffee crop is maturing and “normally” dry weather is not a crop issue. However, it may be an issue this year. Temperatures for the month of April into May are well above normal that may cause some shrinking of the coffee beans, ahead of harvest.

We are in the “maturation stage” presently. Hence, weather later in May-July will be very important for the harvest.

The stronger U.S. dollar, caused by inflationary concerns and rising interest rates, helped to pressure coffee prices through support earlier this week. However, as is so often the case in commodities, “when everyone runs for the hills and is washed out”, that is often time to buy (on fear, not greed)

We can see below the dryness in Brazil and it being too wet for Colombia coffee. The last time this happened was during the La Nina of 2011-2012 when reduced crop estimates for Colombia helped coffee prices rally into June.

Will this happen again and could there be a frost scare for Brazil in the coming months? My next issue of Climatelligence will discuss more about coffee weather in the weeks and months to come and how to trade this.

Jim Roemer

Why Wheat Farmers and Traders Are Smiling Over Our Recent Market Call

Why Wheat Farmers and Traders Are Smiling Over Our Recent Market Call

This past video from early April (click above and subscribe to my youtube channel) discusses how I predicted the explosion in wheat prices and the ongoing Plains drought. Weather will be a huge factor in many markets in the months ahead. But are wheat prices over bought now and is it time to sell wheat? It all depends on global weather and the Russian-Ukraine war.

Is it time to hedge your 2022 crops? Will summer be hot and dry for global grains? This is where Weather Wealth comes in.