“Trading soft commodities on the BestWeather Spider: Global weather & other criteria”
by Jim Roemer – Meteorologist – Commodity Trading Advisor – Principal, Best Weather Inc. & Climate Predict – Publisher, Weather Wealth Newsletter
- Wednesday Report: June 19, 2024
The stronger dollar and weakened El Niño have pressured several commodity markets such as cocoa, cotton, and sugar again, but weather problems related to record-warm oceans, continue to play havoc on some world coffee crops.
First, it was one of the hottest December-February periods for northern Brazil. Then, unprecedented warm March-April temperatures in Vietnam compromised their Robusta coffee crop. Now, it is Central America’s turn. The region has transitioned from droughts in Honduras and Guatemala to near-historic record rainfall this week, which may damage some of the Arabica bloom.
The Weather Spider in our WeatherWealth newsletter gives directional sentiment for all ag markets and natural gas covering 7 different criteria. One can sell below a “0”, (neutral score based on bearish Commitments of Traders statistics (“anti-herd mentality” … -2 means too many specs long the market) vs. a slightly friendly global crop score (1). The reason the global crop score is not more bullish, is due to a lack of a frost threat and upcoming harvest pressure for Brazil.
Each Spider category grade goes from a very bearish (-4), to a very bullish (+4). We then add them all together for the final score.
So… how does one trade coffee when there are both bullish and bearish fundamentals? Trade volatility. Sell out-of-the-money strangles (both calls and puts), until my newsletter says something different.
OK then…
- What about sugar, cotton and cocoa?
- What about how La Niña may affect production?
- What are our trade ideas?
Well, historically cotton production rises globally before the transition to La Niña from El Niño. Notice how (a month ago) we caught the next big move down in prices based on a slightly bearish global crop score (-1) and bearish seasonality and economics (-3: strong dollar and China demand issues).
The next issue of our WeatherWealth newsletter will discuss my longer term view in cocoa. We also had a recent study about sugar. Feel free to download the “old” free issue about sugar here or get a 2-week free trial period during the heart of the main North American growing season markets and find out my new trading ideas in cocoa and the other softs here > > > https://www.bestweatherinc.com/new-membership-options/
Thanks for your interest in commodity weather!
Jim Roemer, Scott Mathews, and The Weather Wealth Team
- Please feel free to learn about Jim Roemer, our track record, and how we use weather to help traders, hedgers, and investors. If you have any questions, please don’t hesitate to drop me a line – Scott Mathews, Editor
Mr. Roemer owns Best Weather Inc., offering weather-related blogs for commodity traders and farmers. He also is a 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.
Trading futures and options involves a significant risk of loss and is not suitable for everyone. Past performance is not necessarily indicative of future results. There is no warranty or representation that accounts following any trading program will be profitable.
On the date of publication, Jim Roemer did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
