# Weather and Agricultural Data

> Weather forecasts, degree days and crop data drive gas, power and grain prices. Learn the main data sources, how traders use forecast models and the pitfalls.

Source: https://learn.tradelabsai.com/alternative-data/weather-and-agricultural-data/  
Track: Data and Alternative Data · Level: Advanced · Updated: 2026-10-03  
Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice.  
Cite as: TradeLabs Learn, "Weather and Agricultural Data", https://learn.tradelabsai.com/alternative-data/weather-and-agricultural-data/

Weather moves markets. A colder than expected winter lifts natural gas prices; a hot, dry July can send corn soaring; a hurricane can shut refineries and offshore platforms. Commodity traders study weather forecasts, historical climate patterns and crop data as closely as equity analysts study earnings. Weather data is one of the oldest forms of alternative data, and its sophistication has grown with better forecast models and satellite observations.

## Markets most sensitive to weather

| Market | Weather link | Lesson |
|---|---|---|
| Natural gas | Heating demand in winter, cooling demand (power burn) in summer | [Natural Gas](https://learn.tradelabsai.com/commodities/natural-gas/) |
| Electricity | Temperature driven demand; wind and solar output | |
| Heating oil | Winter cold, especially in the US Northeast | [Gasoline and Heating Oil](https://learn.tradelabsai.com/commodities/gasoline-and-heating-oil/) |
| Grains and oilseeds | Rain and heat during planting, pollination and grain fill | [Corn](https://learn.tradelabsai.com/commodities/corn/), [Soybeans](https://learn.tradelabsai.com/commodities/soybeans/) |
| Softs | Frost and drought in Brazil (coffee, sugar), West Africa (cocoa) | [Coffee](https://learn.tradelabsai.com/commodities/coffee/), [Sugar](https://learn.tradelabsai.com/commodities/sugar/) |
| Orange juice | Florida freezes and hurricanes | |
| Refined products | Hurricanes affecting Gulf Coast refineries | |

## Degree days

Energy traders measure temperature driven demand with degree days:

```
heating degree days (HDD) = max(0, 65°F - average daily temperature)
cooling degree days (CDD) = max(0, average daily temperature - 65°F)
```

**Example: Degree days and gas demand**
A forecast for next week shows US population weighted HDDs of 210, compared with a 10 year normal of 180 for that week, about 17% colder than normal. Traders estimate this adds several billion cubic feet of extra gas demand, implying a larger storage withdrawal. Natural gas futures rise before the cold arrives. If the next forecast run warms, the rally can reverse just as quickly. See [Storage and Inventories](https://learn.tradelabsai.com/commodities/storage-and-inventories/).

## Forecast models

| Model | Run by | Notes |
|---|---|---|
| GFS (Global Forecast System) | US National Weather Service | Free; updated four times daily |
| ECMWF (European model) | European Centre for Medium Range Weather Forecasts | Widely regarded as among the most accurate for medium range forecasts |
| Ensembles | Both | Many slightly varied runs show forecast uncertainty |
| Seasonal outlooks | NOAA, others | Monthly and seasonal probabilities |

Energy markets often move when new model runs come out, especially if the forecast for the next two weeks changes significantly.

## Climate patterns

- **El Niño and La Niña:** shifts in Pacific Ocean temperatures that affect weather worldwide. La Niña has often been associated with dry conditions in Argentina and the southern US; El Niño with drier conditions in parts of Asia and Australia.
- **Polar vortex events:** sudden cold outbreaks that can spike gas and power prices, as in February 2021, when Texas faced extreme cold and power prices in ERCOT hit the $9,000 per megawatt hour cap.

## Agricultural data

| Data | Source | Use |
|---|---|---|
| Crop progress and condition | USDA weekly reports | Track planting, development and crop health |
| WASDE | USDA monthly | Supply and demand estimates. See [Agricultural Markets](https://learn.tradelabsai.com/commodities/agricultural-markets/) |
| Vegetation indices | Satellites | Crop health from space. See [Satellite, Foot Traffic and Geolocation Data](https://learn.tradelabsai.com/alternative-data/satellite-data/) |
| Soil moisture and drought monitors | US Drought Monitor, satellites | Stress on crops |
| South American crop estimates | Brazil's Conab, Argentine exchanges | Southern Hemisphere supply |

## Trading considerations

1. **Trade the change in forecasts,** not the weather itself; markets price forecasts quickly.
2. **Know the calendar:** weather matters most at critical crop stages and peak demand seasons. See [Seasonality in Commodities](https://learn.tradelabsai.com/commodities/seasonality-in-commodities/).
3. **Expect volatility around model runs** and USDA reports.
4. **Use ensembles** to judge uncertainty.
5. **Manage risk:** weather markets can gap on forecast shifts.

## Frequently asked questions

### How does weather affect commodity prices?

Temperature affects energy demand, rain and heat affect crop yields, and storms can disrupt production, all of which change supply and demand.

### What are heating degree days?

A measure of how much colder a day's average temperature is than 65°F, used to estimate heating demand for natural gas and power.

### Which weather models do traders use?

Mainly the US GFS and the European ECMWF models, along with ensemble forecasts and seasonal outlooks.

You have finished the Data track. Continue with quantitative skills, starting with [Probability for Traders](https://learn.tradelabsai.com/math/probability-for-traders/).

## Continue learning

- Previous lesson: [Social and News Sentiment](https://learn.tradelabsai.com/alternative-data/social-and-news-sentiment/)
- Related: [Social and News Sentiment](https://learn.tradelabsai.com/alternative-data/social-and-news-sentiment/): Text analysis turns news and social media into sentiment signals. Learn how sentiment is measured, from word lists to language models, the evidence and the pitfalls.
- Related: [Natural Gas](https://learn.tradelabsai.com/commodities/natural-gas/): Natural gas prices are driven by weather, storage, production and LNG exports. Learn Henry Hub futures, the storage report, seasonality and why gas is so volatile.
- Related: [Corn](https://learn.tradelabsai.com/commodities/corn/): Corn is the largest US crop, used for feed, ethanol and exports. Learn corn futures, the crop calendar, USDA reports, key demand sources and what moves prices.
- Related: [Agricultural Markets](https://learn.tradelabsai.com/commodities/agricultural-markets/): Agricultural markets cover grains, oilseeds, softs and livestock. Learn the main contracts, the USDA reports that move them, weather, seasonality and trade policy.
- Related: [Seasonality in Commodities](https://learn.tradelabsai.com/commodities/seasonality-in-commodities/): Many commodities follow seasonal patterns tied to weather, harvests and demand. Learn key patterns in grains, energy and softs, how to measure them and their limits.
- Related: [Satellite, Foot Traffic and Geolocation Data](https://learn.tradelabsai.com/alternative-data/satellite-data/): Satellite imagery tracks economic activity from space, from retail parking lots to oil storage and crops. Learn how investors use it, the research and the limits.