Trading Coffee market volatility on the weather in Brazil and Vietnam
“Trading Coffee market volatility on the weather in Brazil and Vietnam”
by Jim Roemer - Meteorologist - Commodity Trading Advisor - Principal, Best Weather Inc. & Climate Predict - Publisher, Weather Wealth Newsletter
- Tuesday Evening Report - October 29, 2024
About 5 weeks ago, my forecast for drought-easing rains in Brazil was quite early and ahead of the pack. While my Weather Spider had been mostly bearish towards coffee prices around the $2.60 per pound area several weeks ago, some bullish weather aspects may raise my Spider to more neutral (unsure for now). I caught wind of this very late Sunday evening:
While there have been reports and photos of lush blooms forming on coffee trees in São Paulo and Minas Gerais, pictures like the one below suggest that at least half of Brazil’s coffee crop will have losses anywhere from 3% to 50%. This is due to historic heat and dryness for much of the year.
Yes, the coffee drought has eased, but rainfall of up to 300-500% of normal in northern Brazil could cause some concerns about fungal issues and/or some dilution of herbicides and pesticides.
- There is a potential scenario for wetter weather affecting Vietnam’s coffee harvest. Their crop may not have been hurt as much as feared, which is one reason for the price fall-off in the last few weeks. Rainfall was very ample this summer. However, El Niño neutral to weak La Niña conditions could cause some concerns with the harvest. There is a tropical system early this week just north of the main coffee areas.
SUMMARY:
The record-long speculative position (aka “managed money”) in coffee futures and the stronger dollar portend potentially major bearish signals for coffee prices if global weather patterns improve later.
The coffee market will remain volatile. These Weather Spiders for all soft commodities and natural gas are featured in our newsletter each week. The Spider has become a bit less bearish now, given some renewed weather problems. That is where we come in. Which futures or options does one use to trade the volatility in coffee prices during the weeks and months ahead?
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Thanks for your interest in commodity weather!
Jim Roemer, Scott Mathews, and The Weather Wealth Team
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.
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.