THE FOLLOWING IS AN ARTICLE FROM LAST MONTHS WEATHERWEALTH MEMBERSHIP

COULD THIS HISTORIC UNDERWATER TONGA VOLCANO CHANGE THE WORLD’S WEATHER?

JANUARY 25th, 2022

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COULD THIS HISTORIC UNDERWATER TONGA
VOLCANO CHANGE THE WORLD’S WEATHER?

Animated Map of Earth Throughout the Seasons

Animated image source: visualcapitalist.com

Possible major eastern U.S. snowstorm later Friday into Saturday night

 

In this Report:

THE RECENT TONGA VOLCANO: CLIMATIC IMPLICATIONS? IT MAY PROLONG LA NIÑA

 

GLOBAL WEATHER AND CROP UPDATE FOR COFFEE TRADING

 

 

U.S. WEATHER PATTERN LOOKS SIMILAR TO THE COLD, FEBRUARY 2014 OUTLOOK BUT MORE CENTERED OVER THE MIDWEST

 

WHAT DOES A WARM U.S. DECEMBER PORTEND FOR SPRING WEATHER?

 

COCOA: STRONGER MID-WINTER HARMATTAN AND SOME DRIER WEATHER

INFLATION & EXPECTATIONS OF FED INTEREST RATE HIKES CREATE PANIC IN FINANCIAL MARKETS

 

WEATHER WEALTH TRADE IDEAS (ALWAYS BOTTOM OF THE PAGE)

 

 

 

 

Please click on the video above to learn more about the recent historic underwater volcano

THE RECENT TONGA VOLCANO: CLIMATIC IMPLICATIONS? IT MAY PROLONG LA NIÑA

An underwater volcano off Tonga erupted last week, triggering tsunami warnings and evacuation orders in Japan and causing large waves in several South Pacific islands, where footage on social media showed waves crashing into coastal homes.

This is very unusual. The shock waves could be felt as far as Alaska, it caused a major oil spill thousands of miles away in Peru, a major Tsunami, caused a lightning storm that lasted 7 hours and its ash went up to about 65,000 feet. Luckily, the damage was isolated to the Island of Tonga but only a few people were injured.

The Hunga Tonga volcano spread a shock wave around the world several times. This was caused by something we call “Gravity Waves”. Think of it when you throw a rock in a lake and see the ripples and how they speed up.

There is really a lot that scientists “do not understand” about magma-water interaction and these types of volcanoes. As far as predicting whether this will have any lasting effect on cooling the climate, will be the subject of much research.

Based on analysis of data from global weather satellites, our preliminary data for the Tonga volcanic cloud suggests that it reached an altitude of 39km (128,000ft).

At this height, a volcano can have a net cooling effect on the planet. But will this one? I do not believe low solar activity is having a cooling effect on the planet.

 

THE ASH PLUME REACHED THE MESOSPHERE

The eruption’s initial blast caused the plume of ash and vapor to climb some 55 kilometers, or more than 34 miles, high into the atmosphere.

Typically, the air stops rising far below 60,000 feet, where air temperatures begin to warm and the air loses its buoyancy. In this case, the upward force of the explosion combined with the heat of the plume allowed the vapor to rise to 180,000 feet.

The top of the plume was a relatively narrow column of volcanic material, likely located directly over the volcano. This feature, which somewhat resembles the top of a smashed witch’s hat, is called an overshooting top in meteorology.

The Hunga Tonga volcano has emitted more than 112 kilotons (kt) of SO2. For comparison, here are some climate-cooling eruptions: Pinatubo (1991) emitted 20,000 kt of SO2 and El Chichón (1982) emitted 7,500 kt. The eruption may continue, but a significant climate-cooling SO2 release is not yet apparent.

Sulfur dioxide that is released from volcanic eruptions like this one can have a cooling effect on Earth, but Hunga Tonga released a relatively minuscule amount of SO2 compared to other climate-changing eruptions.

Source: USGS.gov

If there is one potential climatic impact this underwater volcano has in the next few months, it “might” be prolonging La Niña a bit longer than some computer models suggest. I will discuss this and more about volcanoes in the weeks ahead.

 

Source: Japan Met Center: La Nina expected to persist into the Marc-May time frame and then weaken, thereafter

 

 

 

GLOBAL WEATHER AND CROP UPDATE FOR COFFEE TRADING

We are really in “no man’s land” as far as the current weather is a major factor in coffee prices. The coffee market is watching various crop estimates coming out, the Omicron virus and how it may affect global demand, as well as the Brazil Real and outside markets. (My trading ideas are always under Weather Wealth at the bottom of my reports.)

The most important climatological questions for global coffee production in the next few months are as follows:

  1. With Brazil’s drought breaking for coffee areas (something I predicted back in October), how might a return to wet weather cause disease issues down the road, if at all?
  2. Colombia’s coffee crop was reduced a month or so ago from wet weather. Could wet weather in 2022 lower their production further?
  3. Will there be harvest delays or a freeze scare for Brazil coffee this May-July?
  4. Will El Niño return as some predict and cause droughts and crop issues to the Vietnam crop later this year?

The map above shows above normal rainfall for Brazil coffee and sugar cane areas next week and dry in Colombia. While later next week, there could be some concern about disease issues to coffee in northern Brazil (too wet), overall, I still believe that the weather is “net beneficial” for Brazilian coffee.

No question ( story below) that we are entering a 2nd straight year with a global deficit in coffee stocks. However, that is why prices are already elevated well above $2.00/Lb. In my view, and the point I have tried to get across in the last 3-5 months, is that a total crop of 55 million bags or greater out of Brazil, is probably still large enough to prevent any major additional rally in coffee prices above $2.60-$2.80 unless we have new weather concerns.

 

 

(This is old news and already built into coffee prices)

 

 

 

 

USING TELECONNECTIONS TO PREDICT MID-LATE WINTER AND SPRING TEMPERATURE AND RAINFALL TRENDS

My climatepredict.com weather software has been using the warm Atlantic, La Niña, and things going on in the stratosphere both over the Arctic and Antarctica to forecast the following during the last three to four months:

  1. Easing of the Brazil coffee and sugarcane drought from São Paulo northward with an overall normal to wet outlook
  2. A potential cold U.S. and western Europe cold winter (this is happening the second half of the winter, after a record warm December)
  3. Generally good weather for west African cocoa (however, some things are changing a bit)
  4. Argentina and southern Brazil drought issues for corn and soybeans (This happened for a month, but since then things are not quite as bad)

 

Potential April-June global rainfall trends indicated by our proprietary analytic weather software (1956, 2011)

 

While things can always change, these two analog years (above) you see suggest the expanding drought in the wheat areas, potentially further north into the western corn belt later this spring. Also notice the potential for below normal rainfall in west Africa.

 

 

 

U.S. WEATHER PATTERN LOOKS SIMILAR TO THE COLD, FEBRUARY 2014 OUTLOOK BUT MORE CENTERED OVER THE MIDWEST

 

My forecast from a few weeks ago proved that heating oil prices would soar against the rest of the crude complex. Natural gas prices did not react but have hopefully found a bottom last week.

 

 

WHAT DOES A RECORD WARM U.S. DECEMBER PORTEND FOR SPRING WEATHER?

While not written in stone, a warm December typically suggests a colder than normal late winter and/or a cool spring.

How will this affect natural gas and heating oil prices and spring planting weather? Stay tuned for further updates.

April temperature trends tend to be cold in at least the Midwest and Plains. This could further aggravate the Plains wheat crop.

 

 

 

COCOA: STRONGER MID-WINTER HARMATTAN AND SOME DRIER WEATHER

 

We are beginning to see dry Sahara winds and a stronger Harmattan Wind in West Africa. No question, west African production has been generally robust the last couple of years and has contributed to an occasional “demand talk” cocoa rally. I’ve mentioned selling rallies since 2019.

Typically, La Niña bodes well for global cocoa production but there are a few exceptions. Above, you can see the drought forecast for the next few weeks. Normally, this would be a real bullish scenario for cocoa prices. However, this is the normal dry season in West Africa, so sometimes these forecast models are overzealous.

Which weather events will affect global cocoa production deeper in 2022? How could we see lower production and a bull market in cocoa futures?

  1. If La Niña transitions to El Niño
  2. If the Tropical South Atlantic cools from warm to colder-than-normal. This could suppress spring rainfall
  3. If the Indian Dipole goes negative (warm east of Africa and cool over Indonesia)

 

 

 

INFLATION & EXPECTATIONS OF FED INTEREST RATE HIKES CREATE PANIC IN FINANCIAL MARKETS

The equity market has been under siege at least partly because of the prospect of multiple interest-rate increases from the Federal Reserve. Higher rates can have a chilling effect on investments in speculative segments of the market that rely heavily on borrowing, with investors discounting future cash flows. Talk of inflation has also put a damper on the market and is one of the key reasons compelling the Fed to change from a regime of easy money to one with a tightening policy.

Going back 100 years, the rule of thumb has been that the higher the level, and the faster the surge in interest rates, the worse the returns for the stock market, going out six months. This reality, along with the added tensions surrounding the Russia/Ukraine situation, is also having an effect on some commodities.

 

 

 

WEATHER WEALTH

 

 

 

WHEAT:

My Spider was raised to bullish a week ago and wheat prices have soared on new global weather problems and Ukraine tensions. My advice (if you are a short-term trader) was to book about $2000/contract profit after I raised my Spider following the recent collapse in prices the last month or two. Medium to longer-term, due to the maps you see below, traders are possibly short May put options for about 20-25¢ ($1,000/$1,250 per contract) on the recent wash-out in prices and long the ETF WEAT with at least 5-10% profits.

The Ukraine tensions are also affecting wheat trading. If you did not buy wheat on the huge break over the last month, prices have soared so much the last week or so, I would not do anything right now, and wait.

 

 

 

CORN AND SOYBEANS:

Improving weather in South America into February helped me advise liquidating long May soybeans a week or so ago with at least $4,000 profits, or selling call options and buying put options to offset risk. The outside markets, etc. are too confusing right now for me to have a strong feeling about this market.

If it were not for all of this rain in Argentina, I would be more bullish corn. What happens to the crude oil and ethanol market, are major factors for corn prices in the next few months. It is not just all about South American weather.

 

COFFEE:

Please go back and read my past Weather Wealth reports for the last 1-3 months. I mentioned that given all of this volatility in prices and the outside markets, to either sell call options (Such as the May $2.60-$2.80 call) or to use strangles to trade this market (selling calls and puts to collect premium). I do not want to get caught in any short-term up moves in coffee, without drought conditions in Brazil.

So again, sell the May $2,10 coffee put (trading at about 400 points) and sell the May $2.80 coffee call (trading at about 400 points). Total profit on this trade is about 800 points or $2700 a contract next 2-3 months and you do not lose unless we close below $2.02 or above $2.88, in other words, 800 points above or below the strike prices.

 

 

COCOA:

U.S. grindings (demand) tanked in a report last week. This (plus the stronger dollar) has caused another collapse in cocoa prices.

This is the first time in months that my Weather Spider has been in the neutral to slightly bullish camp in cocoa just based on the weather in West Africa. However, due to the outside markets and the fact that west African production is still a long way from being greatly impacted by dry weather, I am reluctant to give any high confidence trade idea right now. I think the market could rally back some in the weeks ahead.

 

 

ENERGY MARKET AND NATURAL GAS

My best trade recommendation over the last month, was not only buying soybeans and taking $4,000 per contract profit or buying wheat on the break one to two weeks ago, but buying heating oil and spreading it against gasoline. This was due to very tight crude supplies and more bitterly cold weather affecting the heating oil market.

Yes, with temps this week some 10-28°F below normal (map below) it is tempting to rebuy heating oil. However, I already recommended selling into the major rally last week and taking at least $4,000-$6,000 a contract profit on this spread.

Temp departure from normal this week, If this would have happened in November or December, natural gas prices would have rallied back over $6.00. However, inventories are relatively stable right now with no major supply scare.

 

 

With respect to natural gas: Once again stocks are above the 5-year average and prices collapsed early last week. I sent a special update on Friday to rebuy the ETF (BOIL) and to take a conservative long March natural gas position. I mentioned last Friday this was the first time in weeks that my Spider would be raised to a +2. IF YOU DO NOT TRADE OPTIONS, YOU MUST LEARN HOW TO TRADE THEM! ASK YOUR BROKER!!!

I can do an educational piece about options again, down the road. Remember, this market “is a bitch to trade” … and too volatile, but with more bullish EIA numbers and a possible cold late winter and early spring, the odds of March natural gas prices getting below $3.20-$3.50 and staying there is low. Hence, selling (for example), the March $3.20 put last Friday could have yielded about $1000 a contract over the next few weeks. If you did not do this last Friday, when March natural gas prices were at least 10¢ lower than this, I probably would hold off for now and wait for a break in the market.

Frost should hit some Florida citrus later this week.

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