EL NINO - which commodities affected?

DaveT

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The El Nino weather phenomenon is back with a vengeance in 2005 :


El Nino Weather Disruption More Likely in 2005 (Update1)


March 9 (Bloomberg) -- Climate indicators suggest El Nino, the weather pattern capable of causing drought in Asia and flooding in South America, has an increased chance of emerging this year, the Australian government's weather forecaster said.

The Commonwealth Bureau of Meteorology's assessment follows a plunge in the so-called Southern Oscillation Index, which tracks monthly fluctuations in air pressure between Tahiti and Darwin. The index fell from 2 in January to minus 29 in February, the lowest in 22 years. Subsurface sea temperatures in the western Pacific warmed and westerly wind bursts were recorded over the International Dateline, the bureau said.

``These recent developments have increased the chances of a basin-wide El Nino occurring later this year,'' the bureau in Melbourne said today. Its POAMA computer model predicts about a 35 percent chance of El Nino conditions developing this year.

The last El Nino ended in early 2003 after parching two- thirds of Australia, reducing grain, beef, cotton, sugar, dairy and wool production and causing profit to plunge for companies such as AWB Ltd., farm chemical distributor Nufarm Ltd. and cattle rancher Australian Agricultural Co.

An El Nino may worsen a drought that's already taken hold in parts of India and Thailand, slashing sugarcane crops, and in Vietnam, where coffee crops are withering.

``Anywhere that grows sugarcane is El Nino country,'' said Roger Stone, professor of climatology with the University of Southern Queensland in Toowoomba. ``We are sitting on the edge of our seats watching it very closely. The implications are fairly horrific.''

Hurricane Warning

Prospects for an El Nino this year have also increased following hurricanes last month in the South Pacific islands near Samoa, Stone said. Cyclone Olaf lashed the region Feb. 16 and 17 with winds as strong as 260 kilometers (162 miles) an hour.

The hurricanes ``are helping ignite the very strong westerly wind bursts in the Pacific,'' said Stone, who's been tracking climate change, including El Nino events for 20 years. ``They have been enormous over the last month.''

An El Nino can cause drier weather in southeastern Africa, Southeast Asia, the eastern Pacific and northeastern Brazil, the Australian government's forecaster said on its Web site.

In Peru, Argentina, the southeastern U.S., central Africa and the central Pacific, it can cause wetter weather. Warmer weather is typically experienced in Japan, South Korea, Alaska, British Columbia, New England and Quebec, the bureau said.

El Nino events usually develop between April and June, and could be triggered by increased westerly wind bursts, it said. Nine of 12 computer models predict neutral eastern Pacific conditions through July.

``Most computer models haven't included the current westerly wind burst and associated strong subsurface warming,'' the bureau said.



To contact the reporter on this story:
Jason Gale in Singapore [email protected]

To contact the editor responsible for this story:
Peter Langan at [email protected]
Last Updated: March 9, 2005 05:09 EST
 
So, the question I posed (in the Thread titile) is :

Which commodities are affected/potentially affected? To answer this, we need to determine which coutries will be/are being affected.

To Summarise:

Drought in:
- S E Asia (including Vitenam, Malaysia, Phillipines, Thailand,India, Indonesia)
- Australia
- NE Brazil
- South Africa
- Central America
- Pacific NW of America


Excessive Wetness/Floods in:

- Peru
-Argentina


My shortlist of commodities to be monitored/traded are :

1) Coffee - drought now biting in Vietnam. Brazil?
2) Cocoa - Ivory Coast and Indonesia dryness concerns.
3) Wheat - Australia dryness; US Northern and Central Plains states.
4) Rice - Thailand is in drought, Phillipines, etc.
5) Palm Oil - Malaysia now under threat - major producer of Palm Oil.
6) Greasy Wool - Austrialian drought cut prodcution sharply in 2002 (last El Nino)


All these commodities should be watched very closely in 2005, IMO. Drought in the relevant ares is already taking hold. Higher prices seem on the cards.

NB - All these commodities are offered by IG Index, I beleive (Palm Oil and Greasy Wool are listed on their Aussie site)
 
If wheat goes up, corn will go up. They trade nearly in lock-step. Cattle and hogs often trade inverse to the feed grains.
If palm oil goes up, so will soybean oil.
If so many grains go up, it seems reasonable to assume that all other grains/feeds will go up in sympathy.

If crude oil goes up, or even stays where it is now...Well, look at ANY monthly chart. What happened in '73?

In another thread, I jokingly said, "I'm beginning to like inflation." I wish somebody would slap me for that. It ain't funny. I'm not so greedy that I would wish that upon the world.
 
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