In a 2011 WILTW series, we explored the impact of variations in sunspot activity and the potential for the sun to enter an extended slumber. Historical data correlates low sunspot activity with cold winter weather, rising natural gas prices, and potential agriculture disruption.

Sunspots, which have been associated with long-term weather patterns on Earth, have been vanishing more quickly than expected. Presently, we are approaching the end of cycle 24, which has been the smallest 11-year sunspot cycle in over one hundred years. As of late November, there had been roughly 190 days this year with no sunspots on the visible disk of the sun.

The newly-forming El Niño is also setting up to be centrally-based in the tropical Pacific (called a Modoki El Niño), which often leads to cold, snowy winters in the eastern and southern U.S. Several additional factors indicate a harsh winter may be likely, including warmer-than-normal water in the northern Pacific, a heavy Northern Hemisphere snowpack during the autumn season, and relatively-high soil moisture content. Reduced sunspot activity historically results in negative North Atlantic Oscillation (NAO) weather patterns as well, which can alter the jet stream—influencing whether the eastern U.S. is warm or cold or stormy.

What does it mean for investors? First, during the last two solar minimums, natural gas prices more than doubled. In the 1995-96 solar minimum, natural gas prices (NG1) rose from $1.589 in September 1995 to $3.448 in December of that year. During the 2009-10 solar minimum, which also coincided with a Modoki El Niño, natural gas prices (NG1) jumped from $2.508 in September 2009 to $6.009 in January 2010.  From the solar peak in 2000, natural gas prices showed several spikes as sunspot activity declined to the minimum in 2009/10 (see chart).

Source: 13D analysis, Perspecta and Bloomberg data

Second, the onset of a potential multi-decade “Super Grand Solar Minimum” has huge implications for sustained high-energy prices and reduced agriculture production. A global cooling effect from prolonged reduced solar activity could help slow global warming from rising CO2 emissions.

Extended low-solar-sunspot activity has occurred only a few times in the last 1,000 years. Each of these periods resulted in rapid global cooling. The most recent period was the Dalton Minimum (1793 to 1830), which was characterized by harsh cold that caused the “last great subsistence crisis.” The Maunder Minimum, which occurred between 1645 and 1715, saw a dramatic reduction in sunspot activity that coincided with the “mini-ice age,” and a sharp drop in crop output.

A number of scientific papers released in 2017 suggest an extended global cooling could be imminent. Breakthrough, albeit controversial, research from Dr. Valentina Zharkova concludes that the next three solar cycles will see significantly reduced solar activity into the middle of the century (see video presentation here). The result could be conditions similar to the Maunder Minimum, beginning in 2020 and lasting until 2055, with a potential global food crisis occurring in the 2028-32 timeframe.

Third, core energy and agribusiness equities may benefit and could outperform.

Consider the following:

  • Several key factors indicate a brutal winter could be at hand for the eastern half of the nation.
    • Centrally-based El Niño in the tropical Pacific – A number of weather models (JAMSTEC & NOAA’s CFSv2) indicate a “centrally-based” El Niño, referred to as “Modoki,” in Japanese (means “similar but different”) is forming. Although El Niño conditions are developing somewhat unevenly, overall it is continuing to strengthen, and approaching official declaration. However, last month, Japan officially declared formation of El Niño, while the U.S. Climate Prediction Center raised the probability to 84% from 73%, according to Bloomberg.

Centrally-based “Modoki” El Niños often correlate with cold and snowy winters, notes consultant Perspecta. Most recently, two centrally-based El Niños in 2002-03 and 2009-10 produced cold and snowy winters.

Source: Perspecta
    • Warmer-than-normal water in the northern Pacific – The northern Pacific oceans are very hot, notes the recent Browning World Climate Bulletin. Weather models foresee warmer-than-normal water this season in the region south of the Alaskan southern coastline. Warmer-than-normal water on the northern Pacific contributes to the formation of high-pressure ridges along the west coast of Canada. In turn, this enables penetration of cold arctic air to reach the central and eastern U.S.
    • North Atlantic Oscillation (NAO) – During solar minimums, the upper atmosphere cools, which allows for increased thermal radiation to escape into space—enhancing NAO patterns and allowing for a stronger Polar Vortex. The European (ECMWF) Model shows a negative “cold” NAO oscillation.
Source: Anthony Farnell via Twitter
    • “High-latitude blocking” – Evidence also suggests that low solar activity is correlated with more frequent and persistent high pressure in northern latitude areas, such as Greenland, northeastern Canada, and Iceland (see chart below). This type of blocking pattern facilitates sustained cold air outbreaks in the central and eastern U.S. during the winter. During the last solar minimum in 2009-10, which coincided with a Modoki El Niño, it produced the snowiest winter on record in some locations, such as Washington, D.C.
Source: Perspecta
    • A heavy Northern Hemisphere snowpack during the autumn season – A deeper snowpack across the Northern Hemisphere in the Fall increases the probability of colder and denser air masses forming in cold air source regions, such as Canada, Alaska, Greenland and Siberia. The table below shows above-normal snowpack in the Northern Hemisphere—ranking it the 9th highest snow cover extent in 50 years.
Source: Rutgers University Global Snow Lab via Perspecta

For North America, the snowpack for the month of September was the highest in 51 years, and for October it was the second-highest.

Source: Rutgers University Global Snow Lab
    • Seven prior winter seasons with similar oceanic conditions and low solar activity led to colder-than-normal conditions in two-thirds of the U.S. (1953-54, 1963-64, 1977-78, 1986-87, 1987-88, 1994-95, 2009-10), underscores Perspecta.
Source: Perspecta
  • A Super Grand Solar Minimum with a cooling effect 2.5 to 4 times larger than the Maunder Minimum may be approaching. Professor Zharkova was one of the few scientists that correctly predicted solar-cycle 24 would be weaker than cycle 23 (only 2 out of 150 models did so). Zharkova’s groundbreaking research has helped shed new light on the inner workings of the sun and may have improved scientists’ ability to forecast solar.

Zharkova’s models of solar sunspot and magnetic activity have run at a 93% accuracy and suggest that a sustained drop-off in solar activity could begin in 2020. Solar activity could fall 60% during the 2030s to conditions last seen during the “mini ice age” that began in 1645.

Source: Dr. Zharkova October 2018 Presentation
  • The world is entering uncharted territory. Extreme weather events are intensifying and becoming more frequent. Since 1980, the number floods have quadrupled, while extreme temperatures, droughts, forest fires and severe storms have more than doubled.

Sunspot activity has been believed to impact the Earth’s climate for centuries yet is still not well understood and controversial. Only time will tell if Zharkova’s and other scientists’ warnings about a sustained global cooling are accurate. However, the evidence is increasingly persuasive. In a scenario where the world enters a rapid cooling phase, natural gas prices could move higher (see WILTW November 15, 2018) and leading suppliers of energy will benefit (see WILTWs October 4, 2018, November 22, 2018).

Providers of renewable energy and technologies to improve water efficiency and increase crop yields may also outperform. Investment candidates include: Avangrid (AGR, $50.78); Acciona S.A. (ANA SM, 81.12 euro); Sociedad Quimica y Minera de Chile SA (SQM, $45.25); Trimble (TRMB, $37.06); Deere & Co. (DE, $151.59); Honeywell International (HON, $142.68); Lindsay Manufacturing (LNN, $99.81); Raven Industries (RAVN, $38.71); NextEra Energy (NEE, $182.17); Iberdrola, S.A. (IBE SM, $6.64); TerraForm Power (TERP, $11.55); Vestas Wind Systems (VWS DC, 500.60); and Samsung SDI (006400 KS, 216,500 KRW).