Predicting climate and the perfect storm for record wheat prices
Meteorlogist and commodity trading advisor Jim Roemer is the owner of Best Weather Inc., and co-founder of Climate Predict, a long-range global weather forecast tool.
After studying meteorology in college, Jim Roemer drove across the country to Iowa in the early 1980s, where he worked for many years for a small firm called Freese-Notis Weather.
While there, he built up the firm's commodity advisory business and learned the importance of weather in the commodity sector.
Over the last 20-30 years, Roemer said that he's been advising hedge funds and farmers around the world with his WeatherWealth newsletter. Roemer owns Best Weather Inc. , which offers weather-related blogs for commodity traders and farmers.
He's also the co-founder of Climate Predict , a long-range global weather forecast tool, and is one of the first meteorologists to become a National Futures Association registered Commodity Trading Advisor.
Roemer said about 10 years ago, he and Doug Stewart developed the in-house software Climate Predict. The tool looks at historical climatic variables, adjusts them for climate change with predictions sometimes months in advance.
"We wanted to try to find the Holy Grail of long range weather forecasting," said Roemer of the software.
The software relies on teleconnections such as Arctic sea ice, El Niño and La Niña.
"Any kind of climatic event that is relatively stationary that lasts for months at a time, we kind of piece these things together," he said of Climate Predict.
Data from teleconnections is then compared to climatic events in history, said Roemer. For example, with details like 2022 being the third consecutive year of La Niña, Roemer then tries to find analog years using climatic variables.
"Go back 50 to 100 years and say, this looks like for example, the 1996 La Nina analog — wet in the northern Plains, drought in the southern plains for wheat," he said. "And then we try to project two to three months down the road, to give farmers and traders more of a longer term approach to what weather is going to be, and also what the markets might do."
Roemer also references standard weather maps that most meteorologists use, he said.
"But for me to give farmers a better idea of when to hedge their crops or how to trade futures, it's important for me to look at these teleconnections," he said. "And look beyond the standard weather maps."
This historic bull market has been “one for the record books”, said Roemer, most recently inspired by the weather, and La Niña is causing havoc for global wheat crops and Corn Belt planting. In his May 16 report, Roemer said that La Niña is actually stronger than the La Niña events of 1989, 1999, 2008 and 2011.
The extreme heat in India — normally a net exporter of wheat — has curbed wheat exports, and Europe is experiencing some dry weather that is compromising the crop in France and Germany.
All while the U.S. spring wheat area continues to see planting delays due to weather.
"You got the worst drought since the 1950s, from Kansas to Texas, you got planting delays, and obviously up north in the Dakotas and Minnesota with spring wheat," said Roemer. "And now you got France and Spain — which is one of the top producers in Europe, also having a drought, so you have a quadruple whammy."
"So you have this perfect storm, to make record high wheat prices that have occurred over the last week," he said.
Roemer's advice to farmers right now is hedge some production.
"This is once in a lifetime at these prices, because I doubt very seriously later this summer or fall, and especially in 2023, when La Nina finally ends, that you're gonna see these kinds of prices again," said Roemer. "This inflationary spiral, these weather problems around the world will eventually probably ease, so buying wheat in this kind of rally right now may not be advisable, particularly with the harvest coming on in about four to six weeks."
He said even though we have a big reduction in world crops, Roemer expects to see a weakening in wheat prices, although it may not happen for at least a month or so.