Agricultural Commodities and Weather

We have written about how the war in Ukraine is affecting commodity prices. Oil and natural gas are up as foreign customers quit buying from Russia and look elsewhere. Some strategic minerals will be in short supply as Russia is shut off from world markets. The most worrisome issue from a human perspective is looming food shortages as Ukraine is unable to grow and export wheat, corn, sunflower seed oil this year. This compounded as Russia stockpiles fertilizers and grains, using these as weapons in an expanded war. Now commodity traders and much of the world have their eye on the weather in regions that produce wheat, corn, rice, and other crops. Keeping track of commodities and weather will be profitable as time passes.

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Agricultural Commodities and Weather
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Torrential Rains in China

Although the weather this year across China is good for wheat it was not last fall when torrential rains prevented planting or washed seeds away. The New York Times reports on a trip across China that many wheat fields are spotty with healthy wheat growing in places and bare earth in others where no seeds remained after flooding. Estimates of this year’s wheat harvest in China range from only a 3% drop from usual to substantially worse.

Drought in the US and East Africa

On the other end of the weather spectrum drought in East Africa and the South of the US Great Plains are expected to reduce harvest in those areas. Half of the state of Kansas is under severe drought conditions as well as three-fourths of Oklahoma and two-thirds of Texas. These are usually the first, third, and seventh leading wheat producers. Better news is that Canada will have a slightly larger wheat crop this year. Worse news is that extreme drought threatens East Africa (Ethiopia, Kenya, Somalia) requiring more wheat and other grains that will already be in short supply globally.

Less Fertilizer Means Lower Crop Yields

Modern agriculture is hugely more productive than it was before the green revolution. But much of that productively depends on heavy use of fertilizers. Leading exporters are Russia at $7 billion, China at $6.57 billion, Canada at $5.16 billion, the USA at $3.56 billion, and Morocco at $3.39 billion. Because Russia and China have quit exporting fertilizers this sets the world up for shortages and crop shortfalls. The leading importers of fertilizers are Brazil at $8 billion, India at $7.2 billion, and the USA at $5.8 billion.

Options Trading Opportunities

When we talk about the DRINCs the concerns typically focus on overspending in the case of the Democrats and potential military actions for the rest. While Russia’s invasion of Ukraine certainly falls into the military category there are many non-military ramifications of the Russia-Ukraine conflict that affect stock, options, commodity futures, and currency markets. As we have noted, should Putin decide to use tactical nukes as a last ditch effort to win in Ukraine the stock market will tank and volatility will go through the roof. A less rapid but equally destructive set of events are likely to transpire with global food shortages, extreme prices, plus social, political, and military fallout later this year. The sum total of these events will, like the use of chemical, biological, or nuclear weapons cause panic in the market. As we have often said recently, this is not the time to be trading alone. You need intel and you need insight. These are things you can get by trading in one of the Top Gun Options trading squadrons. The value of trading options, unlike investing for the long term, is that you can profit no matter which way the market goes. In the current situation the market probably has a long way to go down and will eventually be profitable on the way back up. Be in a squadron knows how to profit even when the world is in chaos.

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CEO TOPGUN Options, chairman & founder No Fallen Heroes Foundation, founder and CEO, Former F/A-18 USN fighter pilot, TOPGUN (adv) graduate. Father of 3.

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