El-Nino & a major upset awaiting commodity markets

The exotic sounding El – Nino and its impact in the current year could lead to a major upset in the commodity markets on account of considerable changes in the weather under it .

The Australian Bureau of Meteorology shows that the upper surface temperatures of the Pacific is increasing above normal, by 0.5 degree and continue to get hotter in the coming months. Consequently, El-Nino would be witnessed at the beginning of July.

It has the potential to cause famines in the Southeast Asia viz., Indonesia, Malaysia and some parts of India and Australia while South American countries like Brazil, Peru and Argentina could witness excessive rains.

It is likely that in the countries around the Pacific Ocean, particularly in Australia, La-Nina might prevail contrary to the El-Nino. Now, most of the countries under the impact of El-Nino are commodity producers. This might inturn cause a spurt in the prices of zinc, coffee, cocoa, cotton and Soybean.

During the previous El-Nino, Indonesia experienced drought resulting in disruption of hydro-electric power generation which in turn affected the production of Nickel. With water level of rivers going down, difficulty arose for the Nickel ore water transportation.

In Peru mines got water-logged due to excessive rains. Consequently, zinc and nickel prices jumped. According to several traders, as Indonesia has imposed ban on the export of Nickel ore, the market has discounted it and given this no major fluctuation would be witnessed in nickel prices vis-a-vis zinc.

It is likely that the commodity market would become volatile between June and August, under the impact of famine in the Southeast Asia and Australia, whereas exposure to commodities prone to flood damage in South America is better between December and February.

Indian monsoon would be weaker than the normal. With severe El – Nino predicted, despite the irrigation,it could hurt India affecting the already fragile agri – economy.

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One thought on “El-Nino & a major upset awaiting commodity markets

  1. Pingback: Impact of El Nino on India’s Major Crops in Recent Times | Midnightbreakfast

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