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 seasonality in natural gas prices and why the market collapsed 15% the last week
Why some late-season moisture from Nebraska to Kansas/Oklahoma and some rains in Ukraine pressured wheat prices
Weakening El Niño events and possible implications for weather in the corn belt
Why late spring crop prospects are looking excellent in most places resulting in a new bear market in corn
Get better updated weather forecasts second guessing standard computer models for the summer grain and natural gas markets, plus trading ideas from a 40-year veteran. https://www.bestweatherinc.com/new-membership-options/
Enjoy!
Thanks for your interest in commodity weather!
Jim Roemer, Scott Mathews, and The Weather Wealth Team
Please feel free to learn about Jim Roemer, our track record, and how we use weather to help traders, hedgers, and investors. If you have any questions, please don’t hesitate to drop me a line – Scott Mathews, Editor
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. There is no warranty or representation that accounts following any trading program will be profitable.
“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”
Up to 5-10 feet of snowfall in the Sierra Nevadas coming
What is warming at NINO4 east of Australia & possible implications for the transition of El Niño
The 2016 analog may be a good one. This could be bearish grains and potentially bullish Robusta coffee and sugar prices this coming summer, if it verifies
A major stratospheric warming event can sometimes force very cold weather upon key natural gas heating demand areas. This is what normally happens for late February and March when the AO index goes negative. However, I have “faded” this solution to our WeatherWealth clients touting an overall bearish view in natural gas, most of this winter.
The record warm global oceans are contributing to latent heat release (evaporation and more water vapor in the Atmosphere). This is resulting in:
Improved rain chances for Argentina’s key soybean growing areas again deeper into February
Northern Brazil rainfall to rescue a coffee crop, beaten down by previous heat and dryness in December-January
A warm global outlook for natural gas regions with weakened LNG exports
In addition, El Niño has actually strengthened a bit again. The SOI index has gone the most negative of the winter due to the MJO phase, You can see here my warm forecast for the month of March from last week:
So… how do you trade natural gas, grains and other markets? After all, the CFTC Commitments of Traders report shows a large net short speculative position (managed money) in many commodities that may be bound for profit-taking. That is what we do at WeatherWealth (short and long range weather forecasts, but also specific trading strategies one cannot get from any meteorologist. For example, we told natural gas clients recently about the price comparison to the warm 2020 winter.
(chart) Natural gas prices are mimicking the warm 2020 winter. Prices are even lower than $1.60 in part due to a lack of LNG exports and warm weather in Europe as well as the US
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