Jim Roemer 9/24/19 (sample) Premium Weather-Commodity Service Report
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RECENT TRADE RECOMMENDATIONS LAST 2 WEEKS
Aggressive traders sold Nov. beans after the bullish USDA report about 20-25 higher and were stopped out with a loss of 10 cents ($500) on 9/13. Otherwise, my bias has been bearish on rallies due to no frost for Midwest, poor global demand, questions about Trade War and seasonals. However, confidence is low right now due to outside factors.
Aggressive traders sold crude oil in the $60-$62 range after the raids on Saudi oil fields on 9/16 and scalped the market for a $2-3 for $2,000-$3,000 a contract. I had a strong feeling that global production is too large and most of the time these are only short term “knee-jerk reactions.” Since it not weather of course, this was only a short term trade and no new advice
Short Dec. corn from around $3.69 last week. Stops at $3.75. (Confidence lowered from high to moderate) After you potentially rode corn futures up on my forecast of a wet spring last May, and then down on a cool summer and ideas the July USDA crop report would NOT be bullish, I have been in the neutral to bearish camp in corn the last month, corn due to poor demand no frost. The wet Midwest weather may cause some concern later if it continues, but the US crop has improved slightly and harvest is still right around the corner.
Long MSP Dec. wheat from the middle-later part of this week and/or short CBOT futures against it. MSP wheat is up some 40-50 cents on Canada and US spring wheat harvest delays and problems, though we only made this recommendation or “suggestion” late last week.
Out of long coffee a week or so ago on the rally on my forecasts for improving Brazil coffee weather. Otherwise long ½ of a position only of deferred March coffee calls and short Dec. 90-92.50 puts
NEW TRADE IDEAS
Buy Dec. cotton (moderate confidence)--due to floods coming to Indian and Pakistan cotton and Texas crop continues to be lowered. Confidence is moderate only due to the technical nature of the market, global demand issues, US harvest around the corner and no hurricanes coming and Trade War questions. If the market was at 57-58 cents not 60 cents, confidence would be higher. However, while still a week or so away, some damage to the Pakistan and Indian crop could occur. A sharp break if we get it over the next week I would look to be a buyer for now. Also, Australia may plant cotton in a couple months in dust.
Past performance is not indicative of future results and the recommendations above are only suggestions of potential trades, made by Jim Roemer and BestWeather, Inc.
WEATHER COMMODITY REPORT
My forecast several weeks ago that the Midwest frost season would be “extended” and that corn and/or US soybean crops could slowly improve has been correct. However, optimism over the Trade War and various “preliminary” concerns about South American weather, plus the potential for a wet harvest for the Midwest has underpinned corn and beans. We are sort of in “no-mans land” in corn and beans currently until more is known about A) If the USDA continues to lower their production of corn and beans based on farmer yield reports; B) The harvest weather progress, which is right now going to begin 2-3 weeks later than normal; C) This on again, off again claims that the Trade War will be resolved.
The chart below shows the stars of the key states which saw corn crop improvement this last week, due to the warmer weather. South Dakota on the other hand is so wet that it is lowering corn ratings. This has been much more evident in the spring wheat markets where serious harvest delays and crop quality have occurred from Alberta, Canada to Minnesota and the Dakotas.
Look at the (blue) the wet weather over the northern Plains that actually extends way into most Canada spring wheat. The spring wheat harvest, especially in Canada is running some 15-30% behind normal and the Dakotas and Minnesota are in for some more big time rains by next week. If it were not for the fact Iowa and the western corn belt will be getting wetter, I think corn would challenge new lows in the next month. Then we will watch South American weather that could be key for grain prices this winter (their summer).
What is behind all of this warm, wet western Midwest, Plains and Canadian weather? Part of it has to do with the MJO, which by itself is bringing at least a short term end to the extreme dryness to Brazil coffee. However, it is also mostly due to Nino 12 cooling off and looking La Nina like, but we do not have an actual La Nina!
This wet pattern (on the contrary) has also prevented a more serious concern about wheat plantings in Kansas to north Texas where some heavy rains are on the way. This will benefit planting in the southern plains of hard-red wheat, but continue to delay the spring wheat harvest in the north!
Even though Australia has a drought and Argentina wheat needs some timely rains, the demand side of the wheat market is still in question. That is why it has been MSP spring wheat, that I have been most excited about.
Look at the rainfall potential (below) for the next 2 weeks. Very wet for Canadian spring wheat, the northern Plains and the western corn belt. A little premature to worry just yet about the corn and soybean harvest, but I will be monitoring this very closely next month for clients. October Midwest weather will have a big influence for corn and beans. The warm weather on the other hand is beneficial.
Here is another look (below) at the strong MJO which is solely responsible for the break-down of the Brazil coffee hot-dry ridge, I alluded to on September 13th.
This will bring about great rains for the southern and central Brazil coffee areas. The Brazil Real has also fallen to a triple bottom, which is not a good sign. Nevertheless, most of my research suggests some potential problems later on to Brazil coffee, but we need to have this MJO die.
The wet signal you see here is also bringing about heavy rains for west African cocoa. While the rains will insure good soil moisture heading into the winter, it also suggests some potential harvest delays in west Africa and some disease issues the next few weeks. This wet idea, plus efforts by the Ivory Coast and Ghana government to set a floor on cocoa prices, has resulted in steep 15% recovery in the cocoa market the last few weeks.
The maps above shows is getting a bit too wet for west African cocoa, while the northern Brazil coffee areas may get short changed in rains. For this reason, you may want to stay long longer term some conservative coffee call options. But I do not see this market taking off yet.
Finally, with respect to cotton. There was a decent short covering rally after the September crop report as the US crop came in 3% lower than expected. This is not surprising given the dryness in Texas and the Southeast U.S. Presently, there are more than 24,000 short speculative contracts in this market, making it ripe for short covering. Usually, it would be demand news, a US hurricane or harvest delays that would jump start this market. However, while there could be a “lag” price effect if these maps are right about potential flooding to the Pakistan and NW Indian cotton crop in the days ahead. Rainfall could be 300-500% above normal damaging the cotton crop. Cotton is not all weather of course, but some kind of rally could occur to allow a potential short term trade from the longer side on further weakness.