La Nina may be extending run in North America - James Roemer

Paul Yeager   Hello everybody, I'm Paul Yeager This is the MtoM Show podcast production of Iowa PBS in the Market to Market TV show. James Roemer continues his streak as being our most frequent guest on this podcast. We're talking weather and commodities and how they relate. He lives in Florida. But we're going to talk about California. We're going to talk about ocean temperatures. We're going to talk about his call on what are the prospects of a hot dry summer? Again, in the Corn Belt? Is landing you're done? Is El Nino here, are we stuck in neutral? What does this mean? What should you do? Depending on where you're at, we're going to go through a lot of apps. I know a lot of you listen to this podcast. This might be again, one of those you want to watch on our YouTube channel. To see some of the charts James does a pretty good job of describing what's in his chart. So if you're catching up somewhere that doesn't have the video, you should be just fine. But just letting you know this might be one to watch video wise, New episodes come out each and every Tuesday. We love hearing from you. Send me an email at Paul Yeager at Iowa PBS dot O R G, like rate review, subscribe, follow, do whatever it is that you can do to continue to support this podcast. I appreciate each and every one of you that listens and sends me a note. It's great to hear from you. Now let's hear from James Romer. James now wait a minute, you're in Florida. How dare you try to trick us that you're trying to be are you sympathetic to California and their winter weather woes.

James Roemer   I'm a big skier I learned to Moines many years ago, I drive up to the African Alps elevation 600 feet. That was fun. Actually, this is Mammoth. But it's 60 feet of snow or something like that. There's so much that can't even ski. But this kind of situation we look at, you know, from record snows out west to the atmospheric rivers over my shoulder there to the tornado season. We're most active in 30 years. This is how we put our long range forecasts together for Midwestern grain farmers.

Paul Yeager   And that's why I love having you on James. It's so fun. You're You're the most frequent guest we've had on the podcast. So you need to get like a belt or a bell or something that indicates it. Yeah, maybe maybe we'll get you a hat.

James Roemer   An Iowa PBS hat.

Paul Yeager   There you go. I love it. All right. Let's start with the snow. Because yes, crazy amounts of snow. What does that mean? What we know what it means for water in in lakes and reservoirs in California and other states of the West. But why is there so much snow?

James Roemer   Well, first of all, I think this multi year Lemina is weakening. And we also saw the Arctic warm to historical warm levels this winter. And all that cold air from the what we call negative Arctic Oscillation Index blood across California. Now if that would have moved 1000 miles further east, natural gas prices will not be at $2 you'd be back to five or six. The natural gas areas were spared all the coal but outlets across California. Unbelievable. And what you can see the cooler ocean temperatures in response to all that snow and you know like 700 It's a snow it's Snowbird, Utah skier and forecaster for for 25 years. The cool PDO that's gonna have implications for Greenbelt weather this summer. And notice the cooling kind of the arrow there that may prevent El Nino from forming as quickly you need a warming in the Central Pacific east of Australia, for the atmospheric rivers and snow can in a sense, delay the onset of El Nino and everybody's getting so excited about right now.

Paul Yeager   Is this a chicken egg thing which came first the cool ocean temperatures or all the snow?

James Roemer   Right, all the snow first, the trough off the coast of California for three or four months has been sitting there with you know one atmospheric river after another look at this over my head unbelievable. And it's combination of I believe so much climate change that record warmer oceans all over the world we've ever seen this in 1000s of years. The negative Arctic Oscillation Index The warming block over the Arctic Circle pushing the cold air south and a weakened land Nino all this has created this incredible cooling you see off the coast of California right now. And the intense warming you see there off Peru. Yes, that's a sign of El Nino but only if it expands further west and the cool PDO. The negative PDO. We call it the Pacific Decadal Oscillation Index, again may prevent that warming from going for the west until perhaps the fall

Paul Yeager   and these atmospheric rivers as they keep flowing. That is allowing for precipitation, right that's how the moisture channels through. So one One of the theories that I you mentioned climate change, there was a theory out that since it is warmer the air can hold more moisture, hence why we're having more precipitation. Is that bunk? Yeah, I

James Roemer   do believe so. I mean, the, you know, there's so much political jargon and fighting back and forth. different points of view, are their climate change really exist? I mean, just look what's going on in the world. I mean, that we never had a lightning in history in 80 to 90 years. I can recall, though, we had record warm winters and summers in Europe. Well, there's a reason for that, because the oceans are warming up so much. And as a result, you have to see some equilibrium somewhere, it has to offset that warming ocean. And where's that happening off the coast of California? That's the only real cool spell we see in the entire planet right now. So anyway, hopefully that answers your question. Okay.

Paul Yeager   Well, that's a little bit so we what, when we have La Nina, do you think we're out of La Nina, you kind of talked about if El Nino is forming, which means we have to leave La Nina. So do you think we're still in a La Nina pattern as we sit here and mid April?

James Roemer   Well, we're in a situation notice this. It's called Alinea. Moncada cooling the Central Pacific there and warm off the coast of Peru. That will begin the weekend. We're toward a neutral as we get into the summer, but it's really going to be a timing situation right now. I mean, if this cool ocean waters you see there in the Central Pacific, don't warm up by July or August. There's a possibility. We could have another hot, dry summer. And again, explosion in grain prices this July or August again,

Paul Yeager   and you're talking hot, dry summer for the areas that were hot, dry last year to

James Roemer   well look at this. Yeah, I mean, this was an extension of what happened. You know, a year ago, this extreme drought, you see in red across Kansas, and Oklahoma, is still bullish Kansas City wheat, the only thing is that we price a relatively high price right now given history, and you have good weather in Europe, and also maybe some rains in Russia and Australia. Otherwise we price could go over $10 It's really that hard red cloth has been affected, not the software crops around the world, which is kind of bearish. We've seen the spreads widen between KC wheat and Chicago wheat because of the drought in the plains, whereas the rest of the world is actually as I mentioned, relatively good shape. But look at that red still in the northwestern corn belt that continues with the mayor June, then the corn market will start getting pretty excited again about possible drought.

Paul Yeager   I have a relative by marriage in the Sioux City area and we talk about the weather quite often. And she had mentioned last winter they just never had the snow this winter. Didn't really have the snow snow is one thing in the Midwest, it's the rain that happens. We need rain and in that part of of Nebraska, you see that big, very dark red, excuse me, very dark red circle in Nebraska, from say that's north of Lincoln up to Sioux City on the northeast part of the state. Does that spread what would make that spread and be and have a bigger footprint because if you look 200 miles to the east and Iowa the gradient there's not much difference between or I'm sorry, there's a dramatic difference between West and eastern Iowa.

James Roemer   So really, the key is Nino 1.2 Okay. This is as I mentioned before, where it's warming up in my head there right off the coast of Peru and let me just go through this for a second. So if we see just a warming Nino 1.2 and not a full fledged El Nino look how the month of May into early June is kind of one of the normal over the far northwest Corn Belt in blue just to the south of apart about there along the Gulf. It's it's read so it's right on the border in Iowa, you it may begin to get wetter weather here over the next six weeks begin to relieve that drought. Particularly it looks like in the northern plains, even though there's been a lot of snow cover. There's still a slight drought once all that rain snowfall melts here over the next few weeks. And given that possibility of that warming in the 1.2 that Trump should begin to be relieved for the next four to six weeks in the far northwest corn belt and the spring wheat areas temporarily at least.

Paul Yeager   Let's go back to your Drought Monitor there for a minute. Your head is covering up some very good corn producing states. Alright, bye. Oh, Ohio, Indiana, Illinois, Michigan, Wisconsin, they can produce some corn there. Is this an opportunity for producers in that region that maybe it's not going to it's going to be a moderate rainfall amount and allows them to maybe make up some of the difference that the western Corn Belt might not be making if it's still in drought.

James Roemer   Yeah, I mean, we over the last three summers the droughts have been in western Corn Belt or upper crust Is the Pacific Northwest and the plains, you know, a good opportunity to probably hedge corn and beans and we haven't seen, you know, five to $6 corn, you know, very often and has been the case the last year or two because of a combination of droughts in the Midwest and also Argentina. But the whole situation with Taiwan and China, a lot of unknowns, I mean, if there's a, God forbid another trade war, and you know, we do have good moisture, which is very likely over the central region two thirds of the Corn Belt, then quarter the back down the 450 or $4, down the summer, and beans maybe back down to nine or 10. So it's a good opportunity for central ignition Corbeau farmers have probably had some of their crop

Paul Yeager   if you're in the West, we hear these stories of I'm gonna go western Kansas into Oklahoma crops several wheat crops that have not come up in a row because it's so dry any chance of relief for them in southwest Kansas?

James Roemer   Well, I do see some rain coming in over the next week to two weeks but the key jointing stage and heading stages over the next four to six weeks that's where the crop is made. And right now given a lot of my my analogs and studies I'm looking at right now you can see most of the rain really is going to be over the western Northwestern Corn Belt mainly spring wheat areas read along the Gulf Coast there Texas may get some rain but in between that I don't see a lot of relief unfortunately and part of that's because we still have what we call this La Nina Moni copy there's still this central Pacific holding ocean temperatures. And as a result when needed typically means dry weather in the southern plains with areas during the spring.

Paul Yeager   So hot dry summer. La Nina what? I'm sorry? 2.0 1.2? What do you call it?

James Roemer   Oh, okay, so again, this is for to really get a full fledged El Nino Natalie should Nina 1.2 be warm, but all the way for the west into the Central Pacific is of Australia. And as you see, right, it's still kind of normal to cool there where the arrow is? Well, atmospheric river situation that's leading into the Central Pacific, the intense warming again, is that meaning 1.2. And if we look at this more closely, okay, maybe a wet spring and Northwestern Corn Belt. Notice though, you know, kind of cool spring Northwest Corn Belt without needing 1.2 That that star there is the warming. Let's go a little further here. Within Nina 1.2 being warm. Notice how rainfall tends to be below normal. Look at that over the western through southwest corn belt and the plains, right. That's a concern of mine, when you have a strong El Nino, or moderate El Nino, right, that warming extends for the West, you tend to have a wet summer, right? We don't have that we have still a weak leg anemia, and warming it nearly 1.2 That could suggest see the hazard over weather in July, and possibly drier than under weather in July. So again, in order to get this situation with a wet July in the western Corn Belt. What we need to do is see this warming extend much further west over the 3.4 regions. That makes sense.

Paul Yeager   A little bit yeah. So okay, if what's let's go back to those July scenarios that you have because that you're not the first to talk about this July looks better. What's the probability of a wet corn? Well, one there the wet one wet and good for during corn preparation or the dry? Is that a 5050?

James Roemer   Well, I think it for the white corn belt weather again, we have to see this warming extend much further west. And because of the negative PDO. That may not happen. So I think the chances are probably 60 to 70%. Right now we're still going to have some crop production problems in the far western belt. I mean, look at this, where you see that kind of circle of read, it's a little bit hard to see. That's the temperature forecast June through August, and that is with a negative PDO and a warm Nino 1.2. Again, I'm sorry to keep going back and forth with this, but this is what that is right. Yes, intense warming and a negative PDO. And that tends to produce a warm summer over the Midwest and possibly dry there over the western Corn Belt once again this summer. That is my concern. Again, we have to see the warming really extend and wasn't going to negative PDO and of all those atmospheric rivers that occurred. This has been the situation for the summer. We would have potentially, you know Ford our corn, eight to $9 Beans yields five 10% above trendline. That's still possible, but but I'd say the odds are probably maybe 35 to 40% that we're going to see really record yields and an El Nino form by the summer. But that makes sense.

Paul Yeager   Only. Okay, that's a much smaller did that change recently? Because a month ago, it seemed a little more positive.

James Roemer   Well, maybe other people were saying that. I

Paul Yeager   don't know. I think I've been on that train. I don't think he was

James Roemer   gonna form until maybe the end of the summer the fall. That's the problem. And because we still see this cooling there in the Central Pacific. The warming again, I'll keep repeating myself here. That's fine is occurring close to Peru. Well, that's actually creating right now is incredible flooding. Look at this. This is a percentage of rainfall the next two weeks in Brazil. Yes, taking some of the soybean harvest, and three to 5% of adoring for coffee prices. I don't think they can watch for coffee. But that's been one of our best trade recommendations on my wealth newsletter. Coffee has exploded 10% here this week alone, because of flooding that's going to be forming and hurting the coffee crop and delaying the sugar harvest. Because of this warming that's occurring. Off the coast of Peru. There's a very high correlation with wet weather in late April in May in northern Brazil. And they don't want that with the harvest of the end of the soybean harvest and South Paulo and paranoia can be delayed and of course, sugar and coffee is going to be affected by this for sure.

Paul Yeager   Well knows. Yeah. I saw some traffic just yesterday before we recorded this about never trade things you eat. Because you can get burned and things can move quickly. Orange juice, sugar and and coffee. I guess you drink coffee. If you're eating his options. That's a whole nother thing. Yeah. All right. Well, okay. Stick with Brazil with me there. While we're in South America, James. Argentina has been pretty dry. Yes. The break? Is that going to break anytime soon? I think American farmers are curious about

James Roemer   this and rain around. But obviously it's too late to help it probably think, well, we come in at 27 million metric tons with a soybean crop. My goodness. It's like we're 25% below trendline is unbelievable. And the only reason that beans are like 17 or $18 Right now, is because of a big soybean crop in Brazil, what about 150 355 million metric tons. And also because of the Chinese tensions with Taiwan, and you know, discussions of possible trade embargoes and whatever. But if Brazil would have had a moral subpar season this year, we'd be $2 higher and soybeans right now.

Paul Yeager   Yeah, right. Yeah. So what does the rain mean, then for that second crop of everything in Brazil,

James Roemer   what we're seeing old crop soybeans actually strengthened here a little bit the last couple of days. And this is, as of, you know, April, 11, or 12. Partly because of the tight supply situation coming over Argentina soon, but now some harvest delays for parts of parent in Sao Paulo, so the rain is beneficial for the corn crop. But there were some delays for the for the President's soybean crop, the first soybean crop and South America.

Paul Yeager   Which is, you know, I mean, it's the it's the thought that used to not pay attention to South America so much in the United States and Canada, but now you do, because it's a major competitor. And, you know, if China has to go somewhere else for beans, the US usually benefits in one way or another. So what happens in Brazil and Argentina, excuse me, Argentina does matter.

James Roemer   Yeah, and a lot of people are just kind of surprised that that corn and soybean prices are a lot higher, given the fact, you know, we had a drought in Europe last summer that wiped out the corn crop, we have this huge red Argentina last three or four months, but we're relatively high priced, you know, and the dollar is obviously affecting prices a lot. And, you know, we're competing to see, you know, new crop corn and soybean prices kind of come off because of the ideas of potentially some moisture in the Northwest Corn Belt and increase acres this year. But well, it's all going to really depend of course, on June through August weather in the Midwest.

Paul Yeager   Alright. Let's go back to your drought map again, because it's always a good basis of conversation.

James Roemer   I don't want to see this anymore. 

Paul Yeager   James, I was telling you about what before we started rolling, I was out in some fields today. And it's dusty out there. What do you think of the whole phrase, plant in dust, your bins will bust store strong optimism or an accurate forecast for this year?

James Roemer   You know, I think that's held true maybe what 70 80% of the time but during moneyness cycles. That's That's not always true. So we have to see this lemmya. Really, and I mean, officially lending is gone. But that does not necessarily mean that the atmosphere cannot act like Alinea in certain parts of the world. Again, we still have some money conditions even though Medina has officially ended because of the warming of the coast of Peru. So that phrase may be applied many, many years ago. During El Nino, it applies during an ending in neutral when we have neither linea or allinial. It applies. But during a La Nina phenomenon, that doesn't always, you know, make sense. Right. So

Paul Yeager   I know you're in Florida, but in California, it's pretty white there. There's not the we're finally seeing, you know, scenes like that have helped erase drought, I think for the first time in several years across the state. I mean, I think they went at least three years without any part of the state out of drought. And now more than half of the state is out of drought. What does that mean for our food production when California is out of drought?

James Roemer   You know, even though we've had, you know, three to 4% of our snow, snowfall, rainfall out west, a lot of the aquifers need to replenish for more than just one winter. There's still some drought concerns. I think the good news is the scope talk about hydropower. You know, a lot millions of people out west will be able to use hydropower now for electricity. One another reason natural gas prices have actually dropped. And I think, you know, in the long run, this is certainly good news for for, you know, farmers, avocado, peanuts, whatever out in California, the big negative impact has been the wine industry first that are hit by droughts and forest fires, right? Now fires, edible snows, it's actually not beneficial for the wine industry in California. That's probably the biggest detriment that we can see from all these extreme weather events over the last two years from from droughts and forest fires and how to record snow and flight.

Paul Yeager   weather maps do you have I keep putting it back to a couple of them. I want to make sure we get everything, James that you think we should talk about it? Again, we'd like to discuss with you kind of that relationship between commodities and also your agriculture and the weather. What do we have now here.

James Roemer   So during the El Nino event, everybody's gonna have an immune Nino everyone's talking about, those are the trade winds along the tropics, they blow from west to east, okay, and that brings drought to Australia. But during a normal situation, or Alinea, they blow from east to west, we still have what's called a slightly positive s OA index, Southern Oscillation Index. So even though the oceans are warming in some parts of the Pacific, as I mentioned to you, along, particularly Peru, until those winds shift to the west like that, we're not going to be in an El Nino phase anytime soon. And obviously, if we go into this phase, before summer, that's going to mean for our corn for 50 Corn 90 and our beans 10% above normal yields a lot in the Midwest, that may not happen. We may see maybe trendline yields above normal yields in the central eastern belt, potentially below then we'll get on the west. And that's because these trade winds are still somewhat inland Nino phase. Now if these winds shift like that, from Australia, along the equator, the trade winds from west to east that would kill the hurricane season. We've had unbelievable hurricanes. I'm chasing them in Florida for three years. We need that in order to kill the hurricane season, which has been record over the last three or four years. It's been crazy.

Paul Yeager   The hurricane season has been one thing before we rolled you did show me some tornado maps as well. When we recorded this here in mid April, it's been almost three weeks since we had a series of tornadoes go through Arkansas and in heck, we even had some in Iowa. Yeah, early for us. But that's also tied to these changing patterns. Right?

James Roemer   Right. So So one of the reasons the other computer models predicting an El Nino and trying to second guess those okay, I've given you several reasons why the negative PDO off the coast of California for the atmosphere rivers and all the cold and snow is keeping the Central Pacific cool. The other reason is look at this when you have active hurricanes or excuse me tornado seasons in dark blue purple there that usually happens are linear right during El Nino, the red and orange you tend to see less frequent tornadoes. So there's a sign with a near record number of tornadoes here in March and April, that there's still some lending influence and that's why I'm concerned that the western Corn Belt and the plains wheat areas may not see a complete break by any stretch of the imagination of this drought and could potentially see some more problems this summer. Spring and Summer. Yeah.

Paul Yeager   Any other maps of interest that we should look at? Oh boy, always have something that surprises me and my

James Roemer   newsletter weather wealth. Get a free trial. Learn how to trade options and futures in the weather and and get some of the best information. I've been doing this for 3540 years. So I can help a lot of farmers and traders around the world. Other maps, you know, again, what is the negative PDO? Remember a second ago, I showed that cool ocean current right off the coast of the atmospheric rivers. That's a negative PDO see the cool and blew off the coast of California. And a warm phase is to the left. When you have a warm phase, which we don't have that constraint and El Nino we just don't have that situation right now for me to say, with high confidence. All these computer models going for record crop this summer, El Nino by May or June, I just don't see that happening right now.

Paul Yeager   And that's in that 60 to 70%? Or was that the 30%? On chances to fail? I still mean yeah, I

James Roemer   still think there's probably a 60 to 70% chance that we will not see an El Nino in the summer. And what that means is some potential for further drought damage in the far western corn belt into the plains. As we get into June and July. Unfortunately, we'll be monitoring this very, very closely.

Paul Yeager   You talked about the eastern Corn Belt, maybe taking advantage of hedging some, some things on on that news, I guess, mix the commodities in the weather forecasting here about what maybe a producer should do if I'm in if I'm in a moderate drought area. Yeah, what do I do?

James Roemer   Well, well, maybe. Maybe Maybe by putting 30% of your production you know, if you're not in a drought area, you maybe buy puts or sell out of money call options and 70% of your production something like that. There's still a chance we could see maybe corn back to six or $7 this summer and beans back to you know 16 or 17 but if the central the Eastern Bell have generally good weather, we're gonna see a lot of volatility we you know, the biggest droughts the biggest movers in corn and beans were like 9083 1989 2012 the Super Bowl anemia, the entire belt had a drought and I don't think we're looking at the entire belt maybe again the Western 30% Once again, we'll we'll say

Paul Yeager   in the time from when we record this they're supposed to end errs they're supposed to be arraigned system through a lot of these dry areas. What happens if the rain misses? And does that already open up the window and make you kind of want to get onto that? Yeah, we're we're not headed toward El Nino side of the boat even more.

James Roemer   This is tricky because you know like connectivity through middle and we've been deployed after college we have one of the wettest April's Mays on record grain prices were going down. And we had the most severe drought in history almost in July and August. So again, with the week Lenny Lenny the weakening and kind of a neutral El Nino phase right now again with a warming over the the sort of eight time warming over Nina one, two, the intense warming you see there right along the coast of Peru warming one, two, right, sorry.

Paul Yeager   I told you it was gonna be an ab workout. 

James Roemer   Let's notice how as we get into May and June, it still could. There's so many other chances for rain in the far north western corn belt and the spring wheat areas. Iowa, Minnesota, South Dakota, look to me like they're gonna have other chances for moisture getting into May and June is less snow cover up there, too. It's really kind of, you know, Southwest Iowa, eastern Nebraska, down into the southern plains with areas that Southwestern core Bell Plains area. That's a concern I have in the spring, whereas a little bit further north in Northern Iowa and South Dakota, maybe northeast Nebraska. Again, a weakening linea. And just before an El Nino phenomenon does suggest kind of a mini of wet May or June, but then potentially, look at that kind of a hot, dry summer over in red over the western form. Does that make sense? Yeah. So some relief to leave, but then maybe return to dry this later.

Paul Yeager   So don't read into one storm particularly we got a little what, two or three weeks worth. All right, James, I appreciate it. Thank you so very much for the time, I always love how you can go back and forth and your flexibility to roll with whatever punch we throw.

James Roemer   Thanks, enjoyed it very much. And let's do it again. Maybe June or July as we get into pollination of this before pollination, we'll see what El Nino is actually doing if it's actually going to form because it can make a huge difference in these in your grape production of your reformer of course and the prices of commodities.

Paul Yeager   I can't believe I almost forgot to ask about livestock. Because the area we're talking about Kansas, Oklahoma, Texas, huge livestock. We've talked about it on this podcast, as well as on Market to Market any chance for assistance to some of those feed areas?

James Roemer   Yeah, I mean the price of cattle Scott Iraq in it partly because of this drought last year to two years with ranchers liquidating their herds, which reduce the supply of cattle and calving over the course of 1218 months to two years out. Again, El Nino could potentially form in that as quickly as other people think if it does by the fall are next winter, this trout should be relieved by the end of 2023 or 2024. So that would be good news, obviously, for ranchers in Kansas to Texas. But I don't see anything really improving to a substantial degree, at least for the next couple of months.

Paul Yeager   Well, do you see any of the consumer side of things? Because as the consumer goes to look for hamburgers or steaks, some type of beef and just go no, I don't need it. Will that help? I mean, it helps the consumer if they stopped buying but doesn't help the producer who need someone to buy that animal?

James Roemer   Well, it seems like the man had not been following the cattle market as much as Soft Commodities, natural gas and grains. But it seems like demand is pretty strong, isn't it, Paul?

Paul Yeager   It absolutely is.

James Roemer   I mean, I guess because of just the strong economy over the last number of years. I mean, we talk about inflation to having a big effect. So you know, once we go to over $2 in cattle, I don't think we're gonna see any really major reduction in demand. Could we go to $2? I have no idea if it's dry was a persist for another two years. Maybe that's a possibility. Who knows? We'll see.

Paul Yeager   We would see some new cattle areas that's for certain we would actually see a temporary long temporary change somebody where there's some rain so All right, James Romer, thank you so much. Take care. Never a dull moment with Mr. Roemer from best weather Inc. A lot going on and a lot to think about here in the coming months. Next Tuesday, another new episode drops of the MToM Show podcast. We'll see you next time. Bye bye.