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.
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.
Europe dryness needs to be watched for wheat
EUROPE RAINFALL in the PAST TWO MONTHS
- Dryness has been developing (red)
- Rainfall will be critical for European wheat yields in the next two months.
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.
- 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!
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.