El Niño weather conditions can have varying impacts on different commodity sectors. Here are some of the sectors typically most adversely affected during El Niño years:
Agriculture – El Niño often brings heavy rains and flooding to parts of South America, which can damage crops like soybeans, corn, wheat, rice, coffee and sugarcane. Food production and crop yields tend to decline in affected regions.
Energy – El Niño winters tend to be warmer than average in the US, decreasing demand for heating oil and natural gas. Milder winters can also reduce electricity demand. This drop in energy demand can negatively impact the oil, natural gas and power sectors.
Metals & Mining – Heavy rains from El Niño can disrupt mining operations for commodities like coal, copper, iron ore and gold in countries like Indonesia, Chile, Peru and Australia. This can constrain output and drive prices higher.
Palm Oil – Production of palm oil in Southeast Asia, especially in Malaysia and Indonesia, tends to fall during El Niño events due to reduced rainfall and drought conditions. Supply disruptions can lead to higher prices.
Fishmeal – El Niño conditions often drive anchovy populations away from the coast of Peru, resulting in reduced catches of this fish that is processed into fishmeal and fish oil. This can impact the global supply of fishmeal for animal feed.
Presently, this is what I have been watching for my WeatherWealth newsletter clients with various futures, ETFs and option trade ideas. Climate change is also having a major global effect.
A) Weak Indian Monsoon for oilseeds, sugar, wheat, oilseeds, rice, and possibly cotton
B) Australia’s and Argentina’s developing drought for wheat
C) China’s historical heat waves and mixed floods and droughts may have damaged some of the corn and especially cotton crops.
D)Record warm oceans creating too much rain for the West African cocoa crop where disease issues have helped prices rally 10% more in the last 2 months.
E) Wet September weather in northern Brazil could cause some harvest delays or sucrose dilution to the sugar crop and cause an early bloom for coffee that is not wanted
India’s August rainfall may be the lowest since 1901
El Niño often disrupts the Indian Monsoon. The monsoon is very important to India’s economy and has a $3 trillion annual effect on agriculture. Presently, it is the driest since 1901 and I do not see that trend changing, following excellent July rains. This will have a “lag” effect on markets such as soybean oil, sugar, rice, wheat, and possibly cotton and be one partially bullish factor in these markets.
Other than off-again, on-again news about the Ukraine-Russian grain initiative that is affecting trading, this video below talks more about El Nino, the Canada drought, and improving Midwest grain weather.
Please watch the video above about all the extreme weather in the last two years and investment opportunities to help heal the planet.
Investment opportunities to combat environmental degradation range from new technologies in green hydrogen to the innovation of carbon capture companies. Here at Weather Wealth, not only do we advise farmers and traders around the world in commodity ETFs, futures, and options but potential investment ideas in technologies such as this,
When the UK’s Met Office made a long-range forecast for British and European weather in 2020, no one foresaw that its extreme 2050 heat forecast would arrive in 2022. Tuesday, the UK recorded its highest temperature ever, 40.2 degrees Centigrade (104.4 F).
The complete social and economic damage has yet to be calculated for this summer’s wild weather in the Northern Hemisphere but the European Environment Agency estimates that the continent has lost up to $552 billion in the last forty years from extreme weather events.
WIth European temperatures reaching up to 115 Fahrenheit and London thirty Fahrenheit degrees higher than average, is it any wonder the UN Secretary-General despairs?
First Cold, Now Heat: Euro Agriculture Has Taken A Big Weather Hit This Year
This is Europe’s second heatwave this year and forecasts call for more. Heat has not been the only concern for European agriculture this year, however. A record-setting cold snap in April came after higher than normal spring temperatures. Late frosts impacted almond and fruit trees in Spain and wine-growing regions in France. Impacts on grain-producing regions in Germany and other countries were small. however.
The current heat wave has led to early harvest in some soft wheat-producing areas. France’s Ministry of Agriculture forecast that 2022 soft wheat production would decline by 7.2% thanks to drought and heat. France is the largest wheat exporter in the European Union and the world’s fourth-largest.
Heat Defeats Italian Farmers, Already in a World of Climate Hurt
Minster of Agriculture Stefano Patuanelli announced last week that as much as 30% of Italian agriculture will be lost this year due to drought and heat. The government declared a heat and drought emergency in five provinces and Italy’s main farm lobby, Coldiretti, estimates that Italian farmers have lost up to US$3 billion.
The Po Valley Drought Is the Worst in 70 Years
In the Po Valley, the heartland of Italy’s rice growing area, heat and drought have decimated crops. The Po Valley includes the provinces of Lombardy, Emilia-Romagna, Friuli Venezia Giulia, and Piedmonte, some of the most productive land in the country. A farmer there estimated that up to 70% of their crops were already gone. Saline water from the sea normally reaches three miles up the Po. This year, it has intruded up to 18 miles inland, damaging crops irrigated with river water.
Over 50% of Europe and UK on Drought Alert or Warnings
Yesterday, the European Commission published its report “Drought in Europe July 2022“, which found that an unprecedented 44% of land in Europe and the UK is at a drought warning stage, with 9% at the alert level. Winter-spring precipitation deficit was up to 22% more than in 2021 and this is stressing vegetation, especially in the south of the continent. Water Europe estimates that 59% of freshwater use in Europe is for agriculture, with a significant amount used to keep agriculture going in parched Southern Europe.
Water Europe also reports that annual renewable freshwater resources per inhabitant decreased across much of Europe during 1990-2017. The greatest decreases were seen in Spain (-65 %), the greenhouse for Europe, and Malta (-54 %).
In Italy, Minister Patuanelli said that the latest government research showed that Italy had lost 19% of its available water resources from 1991-2020 compared to 1921-1950. He added that the coming decades could see further decreases of up to 40%. Coldretti said that northern Italy has seen half the average rainfall for the last few years. To combat this year’s drought, water rationing has been instituted in cities across Italy.
Too Much of Europe is Burning
This summer’s heat waves have lead to record numbers of fires in forest and agriculture areas. The state of Brandenburg in Germany already has experienced over 260 wildfires this year. Forests in Southwest Europe have been hit unusually hard. Across Spain, over 70,000 hectares (173,000 acres) have burned, around twice the average area in a year. Meanwhile, a record number of hectares have burned in France for this time of year; the fire season has not hit its traditional height.
What Might Be Causing Europe’s Disasterous Heat and Drought?
A recent study in Nature posited that Western Europe has been a heat wave hotspot for four decades, with heat events increasing in both frequency and intensity. The study found that there was an increased frequency of and intensity when the phenomenon of the upper atmosphere’s jet stream splitting into two occurred. Heat waves would then develop between the two flanks of the jet stream, leading to the rise in European temperatures. What caused this divide was not clear to researchers.
For most of Europe, the extreme weather impacts from climate change are already easily seen, no matter what the cause. “The moment of real climate crisis is 2022,” Rudolfo Laurenti, Deputy Director of the Bonifaca Po Delta Authority, told CNN.