As extreme weather continues worldwide, monitoring and accurately quantifying hot and dry conditions can help quantitative teams stay ahead of major commodity market movements. To address these needs, Gro Intelligence, an AI-driven data and analytics company helping businesses, financial institutions, and governments make better decisions on food security and climate risk, has built the Gro Drought Index (GDI). The GDI is a proprietary index of global drought and a high-signal indicator of major agricultural trends such as abandoned acres, yields, and prices.

In this report, we explore two case studies where the GDI led futures prices and presented signals for profitable trades: US hard red winter wheat and US cotton.

You will learn how: 

  • Quantitative and fundamental analysts can use the Gro Drought Index to focus on drought impact in crop-growing areas and anticipate potential threats to production and prices

  • Early on in a crop's growing season, the Gro Drought Index can provide an assessment of the potential for abandoned acres (a key indicator of price) in a growing region, down to the county level

  • There is a significant linear relationship between average monthly Gro Drought Index readings and the average monthly price of major agricultural commodities
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