With FCOJ down substantially (~-13% in just 2.5 weeks and also near lows of the session) and with near or quite possibly THE coldest air of the season progged for about one week from now for much of the SE US and US in general, the risk reward today became imo favorable for the bulls. Currently, I don't see any actual damaging freezes being progged on the main models for the main FL orange areas. Regardless, it appears there's a good chance for very cold air to come into the SE US in about a week. Although not likely, all it would take would be an adjustment of the progged upper air pattern to bring some of the very cold into the main FL orange areas. But even if this doesn't happen (and it likely won't), it does appear that some much colder than normal air could still make its way down there in a week. Even before then it looks like a chilly early to mid week this week. This overall colder pattern, alone, may be all that's needed to result in a decent bounce of prices later this week from what are probably oversold levels as all that would be needed is the addition of some risk premium. Or as Mike might put it, there's very little cold air risk dialed in right now when considering how low prices have gone. What if the market decides to dial some in late this week?
So, without a damaging freeze, this wouldn't be a play for a home run. But it could very well be a good play for a single or even a double. Many of the best plays are singles plays as they don't require a rare set of events to pay off.
Wonderful post Larry, thanks!
You came to the right place to talk about weather trading. I was also looking at(not doing anything) OJ today.
Here's some additional interesting information:
There were plenty of minor freezes too and I'll try to get a site with those.
My initial thoughts as somebody that traded OJ freezes for almost 3 decades(that's alot of time but there were not many). This is just off the top of my head and I may add some items.
1. One of my best/most profitable freeze events was a minor one that happened on Feb 5 in the 1990's but you will note that most freeze events happen in January or late December because the angle of the sun, climbing in the sky, moderates southbound air masses too much by the time we get to Feb.
2. Several things must line up almost perfectly for a hard freeze deep into Florida, even in the optimal time of year. Of course the air mass has to be really, really cold to start with, and have very low dew points. Dugh!
3. Ideally you should have an unusually far south snow pack. This lessens the amount of moderation of the air mass which will happen over bare soil headed south.
4. Ideally, you need an East Coast Winter storm, the farther south, the better. At least as far south as the Mid Atlantic states. Strong north winds on the backside can then DRIVE the very cold air deeply south. Having a solidly negative NAO also works in tandem with this factor.
5. Those winds MUST Be parallel to the peninsula........almost all north to south. Any strong deviation with a west or east component pulls in marine air from the Gulf or the Atlantic. Florida is a very long skinny state. To get all that cold to travel deeply south with north winds and minimal moderation is a monumental task. Those North winds must be sustained over a long enough time frame to drive a modified Arctic air mass deeply into FL.
6. In addition, other than the coldest advection freezes, from brutally cold air that is subfreezing even with wind and clouds and probably impossible in Feb, AFTER the cold/very dry air is in place, you need optimal conditions for radiational cooling all night long on the coldest night. Clear skies and nearly calm winds. This would be associated with a strong surface high pressure system almost on top of the state...........or at least a ridge extending deeply into the state from that surface high. The location/position is important.
7. Additionally, if I'm not mistaken, much of the OJ crop has been harvested already. I forget which variety. Harvest pressure, is one of the reasons that prices often fall before and during this current time frame.
8. So any freezes this time of year, would mainly damage oranges left on the trees and probably not be cold enough to do major tree damage.
9. OJ production has grown tremendously in Sao Paolo Brazil the past 2 decades and is MUCH greater than what we grow in FL.
I'm just presenting the facts with no analysis of the current weather...........yet. Most of those conditions above must be met in February to get a freeze in Florida.
Lows days 3-7 below:
NorthCentral plunges into the DEEEEEEEP freeze late this week!!! MUCH below ZERO!
In order for a legit freeze threat to emerge for FL, we need something like a big storm in the Mid Atlantic region, or moderate sized in the Southeast with a strong enough circulation on the back side to flush the modified Arctic air AT LEAST 500 miles farther south than it is predicted to be now.
Ideally much more than 500 miles.
Here are some interesting records on freezing temps in FL. Note, these official temps occurred on a thermometer that was probably warmer than outlying area thermometers but outlying temps would need to be well below freezing, U-20's or colder for there to be much damage.
Temperatures ≤ 32°F in Tampa, Florida Actual Dates Each Year
Temperatures ≤ 32°F in Tampa, Florida Number Of Days Each Month
We should note that freezes in central and southern Florida have diminished in the last 35 years.
At Tampa, since 1990, these were the events in February. Just 4 out of the 30, going back the last 130 years.
1996 02/05-25° 02/04-31
The coldest one, 25 deg. F in 1996 gave me a huge birthday present. The market had a massive spike higher ahead of the freeze with me long all the way. I covered the day before it hit.
On the day it hit, I remember the talking heads on CNBC telling us how crazy the OJ market was as they showed images of oranges with icicles on them and talked about the major damage.............and OJ was near limit DOWN!
Buy the rumor.............sell the fact!
The maps, if they hold true, will set up a major drawdown on the EIA report on the 17th. The reports on the 4th and 10th, should be about as expected, perhaps a little bearish because supply is still good. But I wouldn't rule out a reaction, just because.
I don't see the possibility of a freeze threat to FL anytime in the next few weeks. And they are really rare in March.
"And they are really rare in March"
As in just one time, on March 5, 1893 when it dropped to 32 degrees at Tampa.
Exited longs at a gain on today's bounce. I was looking for a bounce due to it being oversold and with colder wx, but as I said I wasn't looking for an actual freeze.
We still have not filled the bearish gap lower from Monday's open vs the Friday close, even with today's weak bounce higher.
Today's high of 108.55, got a tad above the Monday high.
The low from Friday was 110.25.
This is a good time of year to see a seasonal low, with the harvest and, in the past, all the freeze damage risk premium bled out.
Should we close above that gap, it would suggest a potential selling exhaustion formation on the charts......gap and crap.
Here's a good discussion/explanation for gap and craps.
Gap and Crap buying exhaustion formation
1 response |
Started by metmike - Aug. 30, 2019, 6:12 p.m.
OJ ended up bouncing a lot more after I covered my longs for a modest gain.