Our new weekly weather-commodity “subscription based report” (Climatelligence) is here, due to popular demand and requests from around the world for our insight. Subscriptions are $1,200 for 42 issues. We will be focusing in on a different commodity each week. For more information about subscribing, please click here and register
Below you will see a sample of what you will receive each week. This particular report was written in June and caught the bear move down in several commodities such as corn and soybeans. Wheat currently has a bullish signal that has been updated in our most recent issues in the last couple of weeks.
Climatelligence Rankings Spider (excerpt from the 6/20/18 issue)
The Climatelligence rankings tables were created by Jim Roemer and Shawn Hackett to help commodity traders, farmers and agribusinesses quantify the influence that U.S./global weather and capital flows have on the prices of agricultural products. The Climatelligence rankings (below) weight weather (Climatech/BestWeather) and capital flows (Informed Smart Money Algorithm) equally to formulate bullish and bearish readings.
Commodities Overview
(as published on 6/20/18)
Soybeans: (+1) Like many Ag commodities, soybeans got caught up in the on-going trade war with China. Close to 70% of all U.S. soybean exports go to China. Ideal Midwest weather keeps us bearish, but farmers should hold off making additional sales due to at least one potential weather scare and the possibility of an over-reaction on the trade war news.
Corn: (-6) In contrast to many other analysts, we became bearish corn a few weeks ago around $4.10 due to the heavy long position and ideal early season growing conditions. We advised farmers sell 50% of their 2018 crop either with put options or by shorting forward contracts.
Wheat: (0) Seasonal harvest pressure may offset some of the weather issues for crops in Russia and Australia for now.
Cocoa: (-4) A volatile market since the winter, the potential for El Niño later this year and stronger grind data out of Europe and Asia keeps us slightly bullish at these price levels.
Cotton: (-3) Trade war concerns are keeping us from being overall bullish, as well as seasonally lower prices during post La Niña years, as winter nears. However, tight global stocks and the on-going drought in Texas keeps us slightly bullish.
Coffee: (0) No freeze for Brazil and big global stocks has kept us slightly bearish. However, dryness developing in Brazil, plus a heavy short position in the market and SMART MONEY’s more neutral bias, have somewhat lessened our bearish stance. A potential bull market could ensue later for Brazil, due to El Niño.
Sugar: (-2) Prices got caught up in the crashing Brazilian Real. Huge global supplies and benign weather this past year helped us become bearish around 20 cents about a year ago. However, the heavy short position in the market and potential Pre-El Niño dry concerns in Brazil, could affect the third quarter sugar cane crop.
Focus on Coffee (as per the 6/20/18 issue)
Coffee has always been one of the most sensitive Ag markets to movements in the Brazilian Real. While a heavy speculative short position exists in the market and Smart Money suggests a possible buy, the weather in both Colombia and Brazil continue to be mostly beneficial with no freeze scares for now. The Bestweather weather spider score is slightly bearish (-3), while the Smart Money score is +3, netting to a zero score. Nevertheless, growing dryness in northern Brazil could cause concern for the 2019 crop turning us more bullish, soon.
Brazil’s Vegetative Health – According to BestWeather:
The blue lines above show the Smart Money Chart, developed by Shawn Hackett. It has to do with a complex Algorithm related to the commitment of traders reports (“COT”), seasonality and technical factors. One can see that coffee is slowly edging into the buy zone. It will take fundamental weather related weather issues to cause a strong buy signal, but this could well happen, by the fall. The Brazilian Real may be be bottoming out, as well.
Smart Money Summation (6/20/18):
A new informed smart money indicator algorithm buy signal has been triggered in the coffee market. We have seen a series of buy signals over the last year whenever prices have fallen under $1.20/pound. Given the historical upside volatile nature of coffee price rallies, patience is usually a virtue. This supports optimism on an intermediate term basis and meshes well with our longer term bullish weather outlook. End users, longer term hedgers and positional traders should be considering protecting upside price risks at this time.
Climatech (6/20/18):
Our proprietary long, range weather forecast software illustrates below the potential for some fall dryness to the Brazil coffee crop later this year. The three checked boxes represent one solution our program comes up with. Climatech found some of the most important “similar” teleconnections (https://en.wikipedia.org/wiki/Teleconnection) critical to Brazil’s coffee weather. Currently, the very negative QBO index (stratospheric winds blowing east to west (https://en.wikipedia.org/wiki/Quasibiennial_oscillation) and a similar weakening La Niña that may turn into an El Niño Modoki later this summer or fall.
Coffee Conclusion on June 20, 2018
The Climatelligence rankings table above shows a neutral bias in coffee. The score combines both present weather fundamentals, which have been bearish (-3) and the Shawn Hackett Smart Money algorithm that is a (+3) and turning bullish.
The Smart Money algorithm is based on the heavy short position in the market and seasonal factors that portend possibly higher prices in the months ahead. In addition, the Brazil Real seems to be bottoming that could help coffee later this summer or fall. Our bias is for traders to begin looking at the long side of coffee, in a longer term call option position expecting some sort of rally later this fall.
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