The map above shows a similar type of La Nina’s and what happens with South American rainfall from December-February. Notice the dry areas in some key soybean and coffee regions. This will be important, later on after the US corn and soybean harvest which is FINALLY pressuring prices.
Some of these analog years had a cold October in the eastern US and cold early winter. I believe that this is causing some short-covering in natural gas right now, after the major washout on the mild fall weather and each hurricane causing demand destruction for natural gas. Stay tuned for longer range outlooks for multiple commodities in the weeks and months ahead.
What is Moving the Markets And Preview Of Next Monday’s Report?
Our timing was about three days off recommending a potential bearish fall out for soybean prices due to the still big US harvest coming on, even though the crop was lowered by the USDA due to the flash drought in Iowa and the historical wind storm. I still have some concerns about China weather and will address this next week as there may be more flooding than expected in the northern areas. This may only be a minor factor in a market so affected right now with the dollar, outside markets, US harvest pressure, etc. If this dryness persists in N. Brazil another month or two, this could set the stage for a bull winter market (Stay tuned)
There is a chance for frost around October 2nd in Wisconsin and Minnesota where a small % of the soybean crop may still be immature
Notice on the table below that soybeans have gone lower into early October 13 of the last 15 years but the trade date too short them was never later than September 19th.
I was bearish soybeans on great US harvest weather and now this is coming to fruition, later than I thought, but given the outside markets, possibly more China flooding next week, and South American dryness, I would not advise being too bearish soybeans at this level.
Great harvest weather for the corn crop has pressured prices and the stronger dollar. I will update on Aussie, Ukraine and Argentina weather for wheat. Needed rainfall is coming to Argentina shortly as well as Europe and western Ukraine and was one factor pressuring the wheat market.
But how about the Plains in the US and longer-term prospects for global wheat production during La Nina? Stay tuned for future reports, again in the weeks and months ahead.
A potential cold outlook in the eastern US with a huge ridge and warmth out west is causing short covering in the nearby contract following the major collapse in prices due to the mild fall and hurricane BS that causes demand destruction
A return of rainfall forecasted for West Africa and concerns over Covid-19 caused a 5% sell-off cocoa prices earlier this week. We advised traders considering selling December cocoa above this level last week or buying March put options longer term. There are still concerns over the elections in West Africa and some political turmoil that is helping the market, vs potential bearish weather
With respect to coffee, there are rains headed for Brazil this week but coffee has been under pressure again due to the huge global supplies, Covid-19, and technical factors. If and when the coffee areas turn dry for more than just a week and if and when there is actual crop stress, this market “might rally” back heading into October. I do not believe there is enough rain for the coffee areas, so my bias has been, after suggesting two Sunday night’s ago that the weather would turn bearish coffee (which it has for now), a potential dry October could help this market snap back within the next week or so.
Coffee is a tough market to trade and very volatile and I will have some updated reports next week or the week after about La Nina and longer-term coffee prospects.
My feeling is with moderate confidence to be buying breaks in this market, though it may be best to wait till after these rains and see what the longer-term prospects are, I am concerned about some heat and dryness in about a week or two for Brazil coffee, but will it last for a month or so? Stay tuned for updates soon.
If we come in next week with a ridge and dome over Brazil coffee and not enough rain fell this week, I think coffee prices may rally back. However, for producers and commercials to panic, there has to be dry weather throughout October and November. Again, stay tuned.
Rainfall last 30 days has been well below normal for Brazil soybeans and Coffee
Brazil coffee and soybeans areas are too dry. Though it is only mid-September, if this continues through October, this will cause concern in the soybean and coffee market, later.
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