Brazil's Drought & BestWeather's Spider by Doctor Weather (a.k.a. Jim Roemer)

May 14, 2021

by Jim Roemer

The incredible rally in grains the last few months began to fade this week. The reasons 

are complicated and not just due to the temporary closing of the great Mississippi River 

and barge traffic being backed up. It also has to do with some changes in the weather in 

the United States, Canada, and Europe, as we get deeper into May and heading towards 

June. 

Notice, below, my OLD BestWeather Spider (from late March), disclosed each week to 

subscribers of my WeatherWealth newsletter, along with long-range weather forecasts

and general trade ideas here:

https://www.bestweatherinc.com/new-membership-options/

SOURCE  https://www.bestweatherinc.com/ (Take a look)

My spider began to change earlier this week from bullish to more bearish

“before” the collapse in grain prices. Is it old news with regards to the Brazil drought? 

The severe drought has caused a historical tightness for corn and soybean supplies. 

It has also helped to rally sugar and coffee over the last few weeks. The map, below, 

shows the key agricultural areas for these three commodities. 10 years ago, Brazil 

was ranked only third or fourth in agricultural production; now, it is the world's largest 

producer of these crops.

One can see that over the last few months, rainfall (dark brown) has been less

than 30% in these key agricultural regions. The reasons are a combination of

deforestation issues in the Brazil rainforest, but also because of La Niña.

Some of the interesting, fun, and specialized advice we give to subscribers is how to 

trade grain and soft commodity spreads and options. The ongoing drought has created 

added tightness for global commodities. We can see that tightness in nearby contracts 

caused some unprecedented “backwardation” in markets such as corn, soybeans, and 

sugar. In other words, the nearby July contracts are much higher priced relative to the 

deferred October and December contracts.

Our future reports for clients will discuss a lot more about these commodity trends, and 

if they will continue, or not. However, for now, improving U.S. weather for grain planting 

and better rainfall in Europe and Russia (for wheat) has added to this week's bearishness 

in several markets.