Commodities Are Booming

While the U.S. dollar continues to fluctuate on fears about rising interest rates, inflation, and a strong economy, global stocks for many commodities have been tightening.

Grain stocks are some of the tightest in years brought on by stellar Chinese demand and La Nina weather woes, which began late last summer. First, it was the historical Iowa wind storm wiping out crops last August, then lower crops in China, Ukraine, and then South America setting some of these markets on fire. In contrast, ideal global weather and COVID-demand fears have hurt markets such as cocoa.

Take a look at what Brazil's corn prices did last week. There are certain spread trading opportunities going on right now with respect to many US wheat contracts as well as new crop December corn based on the weather.

The areas in the grain and coffee markets that bear watching are in northern Brazil, where the red (below) shows more extreme dryness returning recently, and in the northern Plains into Canada where spring wheat will be planted in May.

SOURCE OF MAP: WEATHER BELL

The second map below shows the expanding drought for the spring wheat crop. If La Nina strengthens in the next month or so, watch out grain market. This is what I am focusing on and developing trade ideas.

Conclusion 

My Best Weather spider paints a relatively bullish longer-term picture in commodities, but things can change on a dime and it is important to develop various options strategies to protect risk.

Disclosure: It is my job to alert traders and farmers in advance to how weather will move many markets, often, before the market becomes aware of it. 

This is an excerpt from James ...

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