El Niño Threatens Global Commodity Markets

A potential El Niño event is brewing in the Pacific, which could lead to significant disruptions across agriculture, energy, and industrial commodity markets. Barclays analyst Craig Rye warns that this could be a major shock for commodities.

Rye expects the largest price risks to appear in agricultural commodities grown across Southeast Asia and other regions vulnerable to El Niño-related droughts. Palm oil, coconut oil, natural rubber, robusta coffee, and rice are likely to see significant price gains over the next 18 months, with potential price increases ranging from 10% to 40%.

The impact of El Niño will not be limited to agriculture. Weaker hydropower generation could support copper and aluminum prices, while increased demand for thermal coal could drive up prices by 20-40% over the next 18 months.