Drought Severity Ag Input Short
In plain terms
When the US Drought Monitor shows severe drought (D2+D3+D4) expanding across the corn/wheat belt to the worst 10% of the past 3 years, food companies that buy a lot of corn and wheat (General Mills, Kellogg, Campbell, Kraft Heinz) face cost pressure. Short the basket for 1-3 months.
How it works
USDM weekly drought severity (sum of D2/D3/D4 % coverage across farm-belt states IA/IL/IN/OH/KS/NE/MN/MO/ND/SD/TX/OK/MI) expanding into the top decile of trailing-3y history signals tight ag-input supply. Food processors with heavy corn/wheat/oat input exposure (GIS, K, CPB, KHC, CAG, MKC, HRL) face input-cost pressure that flows through to margins ahead of the next earnings print.
Data dependencies
- Daily prices
Adjusted-close OHLCV for every US-listed ticker; primary price feed.
- Usdm drought
A data feed this strategy reads, refreshed on its normal schedule.
Expected edge
- Reported return
- -2 to -4% over 30-60d
- Tested over
- T+8d to T+60d
-2 to -4% over 30-60d on food-processor names during top-decile farm-belt drought.
Example tickers where this is likely to fire
Illustrative only, the signal fires based on the live data, not a fixed list.
Related families
Long-running farm-belt drought → long water utilities + seed; short food processors.
When NOAA's El Niño index (ONI) hits strong territory (>= +1.5), coffee, sugar and soy supplies tighten globally. Companies heavily exposed to those inputs (Starbucks, ADM, Bunge) tend to rise over the following 3-6 months.
USDA WASDE yield surprises: an upside surprise (bumper crop, cheaper grain) helps processor margins (ADM/BG/INGR/DAR) and hurts equipment demand (DE/AGCO); a downside surprise is the reverse.
Explore Drought Severity Ag Input Short on alphactor.ai
See which tickers this family is currently firing on, with live signals and rankings.