Jim Roemer – Tue May 14, 7:49PM CDT 

(SBN24) (SBV24) (SWQ24) (SWZ24) (CANE) (RMN24) (RMU24) 

“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.

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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.

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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.

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Source:Barchart.com and WeatherWealth newsletter

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. 

You can download a past free issue from WeatherWealth here  > > >   https://www.bestweatherinc.com/new-membership-options/

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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”