Please note that I am not taking any questions from subscribers for the next few weeks. Thanks — Jim
In This Report
Introduction
How, back in April, I forecasted a big crop for US corn/soybean & my original bearish attitude
Do volcanoes play a major role in changing the weather?
Can volcanic eruptions cause Midwest corn/soybean harvest delays?
The climatological factors that will affect corn belt harvest weather
WeatherWealth Trade Ideas
Introduction:
Grain prices have rallied back a bit (post August USDA report) due to heavy short spec positions from wheat to soybeans and corn, combined with improved short-term demand and some seasonal tendencies. In addition, there are some “rumblings” that the USDA has been too high on their yield crop estimates. I reserve judgement on this. However, poor demand for soybeans and possible good harvest weather this autumn should prevent any major rally in corn and soybeans.
Two weeks ago, I said my highest confidence trades were short natural gas and buying breaks in cocoa (due to my fall forecast for worsening crop prospects). The market already did what I expected and may be oversold, but I have no interest in recommending to buy natural gas, due to record cool August temps.
The cocoa market forced a lot of weak longs out below the support level, only to rally back on this recent dryness in West Africa that I see continuing.
Coffee prices have gone absolutely nuts on concerns about trade tariffs, incredibly low certified stocks and technical buying. A weak La Niña is forming that should improve things later this year. Right now, the weather is not really a factor in coffee.
This report answers a few client questions about volcanoes and potential corn/soybean harvest weather later in September and October.
How, back in April, I forecasted a big crop for US corn/soybeans & my original bearish attitude
The most important teleconnections I looked at last spring (stars) are complex but helped me forecast decent July corn belt rains right during pollination. They range from 1) “El Niño neutral” and 2) Weather patterns over the North Pole (PT index) and several others.
The lack of extreme heat also helped us go back into a bear market in corn and soybeans most of the summer.
Part of this bearishness is already built into prices as seasonal factors and big short positions in grains helped the market rally off their pre-August USDA lows.
Do volcanoes play a major role in changing the weather?
On August 5th, the volcano sent an ash cloud eight kilometers into the sky which erupted for the first time since the 16th century.
A huge 8.7 magnitude earthquake then formed and hit east-southeast of Petropavlovsk-Kamchatsky which triggered a tsunami warning.
The earthquake which hit Russia’s east-southeast region is thought to be one of the strongest quakes on record.
VERY LARGE volcanic eruptions can affect global weather, but it depends on several factors:
Eruption Size & Weather Impact
- Ash plume height: The Krasheninnikov eruption produced an ash plume reaching as high as 6-8.5km (3.7–5.3mi) into the atmosphere. For context, truly major eruptions that affect global weather (such as Mount Pinatubo in 1991) launch ash and sulfur dioxide 15–30km high; while Krasheninnikov’s plume was significant, it remained well below this level.
- Aviation alert: The eruption prompted a “red” aviation alert due to substantial ash in the atmosphere, which later was downgraded as activity decreased. Authorities warned that additional, higher ash explosions could still occur, but as of mid- August, the ongoing eruptions and impacts stayed localized.
- Location: The volcano is situated in a remote area, and the ash cloud moved east over the Pacific Ocean, away from populated regions.
- Comparative impact: There is currently no evidence that this eruption has produced, or will produce, significant cooling or global weather shifts. This is due to the height and magnitude of the eruption, with ash in the lower stratosphere and little reported sulfur dioxide.
Can volcanic eruptions cause Midwest corn/soybean harvest delays?
Yes, volcanic eruptions can cause delays in the Midwest corn harvest under certain circumstances, but it depends on several factors.
I do not think the recent volcanoes were high enough to cause any significant change in the climate or affect the Midwest grain harvest.
- Sunlight Reduction: Volcanic ash and aerosols in the atmosphere can reduce the amount of sunlight reaching the ground. Corn requires many heat units and sufficient sunlight to reach maturity. Reduced sunshine during the growing period can delay crop maturity and slow harvest.
- Ashfall Impact: If volcanic ash reaches Midwest cornfields,it can damage the plants and make harvesting difficult. Ash can contaminate grain and, if heavy, even cause crop failures.
- Historical Precedent: After very large eruptions that affected global climate—such as Tambora in 1815—the “Year Without a Summer” brought cold, wet weather that caused widespread crop failures in the U.S. Northeast and parts of the Midwest due to reduced temperatures and less sunlight. These are rare events, typically following only the largest eruptions.
The climatological factors that will affect corn belt harvest weather
Study 1–Teleconnections
Climatic staples sometimes thousands of miles away that connect different weather variables (such as ocean temperatures). When linked together, they can help me come up with analogs (similar past situations) to make long-range weather forecasts.
(Red Stars): A possible very weak La Niña or “El Niño neutral”, a negative Indian Ocean Dipole (specific ocean temperatures around India) and the weather patterns over Eurasia suggest drier than normal corn belt weather over 75% of the regions.
Study 2- Looking at wet Iowa Julys
1993 was one of the worst flooding years in Iowa and Illinois history, with a bull market in corn during July, (that is unusual) as millions of acres were lost.
This July was the second wettest on record, after 1993, but not historic.
Based just on this, below is the 1993 ClimatePredict map showing a dry October (red).
Hence, while 1993 alone is not statistically significant, El Niño neutral or weak La Niña events coupled with wet July corn belt weather is often good for the harvest.
Conclusion/Bottom Line:
We are not in an immediate weather market in corn and soybeans right now, although cool August weather could still maximize yields for soybeans and be a bit bearish. Based on this study, if harvest weather is decent later next month and in October, it could help corn prices challenge my original objective of $3.80 (which I alluded to in April-May) and soybeans possibly below $10 again. Harvest pressure, or the anticipation of it, is at least four weeks away.
WeatherWealth Trade Ideas
Corn: Big short position and some demand and questions about US crop size help prices rally
(low to moderate confidence short term–neutral Spider, moderate to high confidence for prices to decline late by harvest to $3.90)
No new advice right now following my bearish attitude most of the spring and summer
Notice the global crop score was raised from a very, very bearish (-4) most fo this summer, to bearish (-3), only because there have been reports that the USDA’s 188+ bu/acre projection may be too bold. The chart pattern is not as bearish, as we broke above some short term resistance a week ago (+1) and there are slightly bullish seasonal factors (+1). Overall, the moisture and temperature index remain bearish and could eventually result in prices challenging the recent lows in prices once harvest begins.
The seasonal score will become more bearish in about 3-5 weeks and will take this score back to slightly bearish again before or during harvest, if my autumn forecast is correct, for limited harvest delays.
Cocoa: Talk of rains in West Africa last week are not correct. Crop problems continue vs questions about demand
(moderate to high confidence bullish by fall, unsure short term)
Traders who may have bought December cocoa below 7900 might have been stopped out with a $3,000 loss early last week.
Two weeks ago, I did not get caught up on the hype over crop issues in cocoa when we soared to 8800 in two days. At that time, I said to “wait for a break” below 7900 and risk a stop to 7600 ($3,000), of course that happened very quickly, screwed every one over and now the market has rallied.
I remain cautiously friendly towards this market. However, there are about five different fundamental factors affecting this market. At this point given market volatility,
I would leave the market alone until cocoa prices react more to West Africa weather (if at all) and appear technically stronger
BS talk last week that it has rained well in West Africa was one reason for the break in prices. While not a major factor yet, I see dry weather that will continue into September that could begin to compromise the end of the main crop and beginning of the mid-crop.
Coffee: Historic August price surge due to low certified stocks and trade tariffs. Weather becomes more important again later in September
(Low confidence short term, moderate to high confidence within a couple months, bearish)
Out of short Robusta coffee and/or short December $3.40 calls a week or so ago with a loss while being long the March, 2026 $3.00 put option from three to four months ago.
At one point, long the March, 2025 $3.00-$2.50 put option spread was ahead over $3,000 a contract . I advised lifting the short put a week or so ago. The long put is behind above by $1,500 a contract.
Once the coffee harvest begins in Vietnam by later this fall and if Brazil gets off to a good early bloom (stay tuned for details later), I will recommend more aggressive short positions.
Natural Gas: My Spider became cautiously bearish two weeks ago on cool weather and no Gulf hurricanes but market became a bit oversold
(moderate confidence prices will make new lows again within a week or two)
No new official advice (read between the lines)
Roughly two weeks ago, I upped my confidence that I thought prices would fall to $2.70 given no Gulf hurricanes and one of the coolest Augusts in recent memory. The ETF (KOLD) has rallied more than 15% during the last two weeks and around 35% this summer.
The temperature score is actually a (-4) now (very bearish). This Spider was from two weeks ago. However, the chart pattern may be a bit oversold, so instead of a (-3), perhaps more like a (-1). The anti-herd mentality (too many short speculators in the market) may be a very bullish (+4). The bottom line is, my updated Spider would still be at least slightly bearish.
Soybeans: China not buying any new crop soybeans, and cool August weather could mean the high in prices are in for now–but some dryness concerns linger in eastern Midwest
(moderate-to-high confidence prices will not reach $11, low confidence short term–too dry some areas)
A week and a half ago, I advised selling three November $10.70-$11.00 call options, on rallies.
I said it may not be worth it unless one does about 3 contracts each. That would bring in anywhere from just $1,200-$2,800 a contract by expiration if good harvest weather prevails for soybeans this fall and no surprises with trade tariff agreements. If you did not do this in the last week on the rally, forget about it for now. I have no interest in recommending buying, just based on US weather.
However, there are too many factors right now to give me high confidence that we are going into a bear market as the US crop may be lower than the USDA’s outlook. We may go lower by harvest, but in the short-term there is some increased demand for products like soybean oil.
Sugar: Big crops for Thailand and India and a great monsoon = bearish (along with low crude prices and tge lower Brazilian crop.)
(moderate confidence prices will not rally above 18 cents)
About three weeks ago, I casually mentioned to sell October sugar around 16.20 and recently put a stop above 17 cents for a $800-$900 risk. My confidence has not been high in this market
% of normal rainfall in the last 2 weeks: The return of big rains in India has helped to pressure sugar prices a bit.
Wheat: Tempting to suggest a buy recommendation, given such a big short position and US harvest pressure mostly over
(I have moderate confidence that prices will remain above $5 during the next few months.)
A bit of a gamble and not really in a weather market, but if one wants to buy December CBOT wheat and risk to $5.12 (15 cents or so, which is $750), it may be worth it. If you did this, however, I would be short soybean calls or corn against it on any rally. Otherwise, do nothing.
