El Niño's Price Puzzle: More Than Just Weather
A super El Niño is expected to hit in September 2026, potentially affecting global commodity prices. Zhang Siqi, an experienced commodities researcher, explains how weather anomalies can impact everyday essentials like palm oil, sugar, rice, wheat, coffee, and rubber. According to Zhang, the magnitude of price increases depends on several factors, including the thickness of global inventories, export concentration, substitutability of feed formulations, and costs such as nitrogen fertilizer.
The researcher emphasizes that climate changes only affect the distribution of rainfall, temperature, ocean conditions, and water resources, which in turn can impact crops during critical growth stages. She breaks down the transmission framework into five groups of factors: supply, demand, inventories, policy and logistics, and financial conditions. Zhang argues that studying El Niño requires focusing on three key questions: the weight of affected production regions in global trade, which stage of the crop is hit by weather, and how tight global inventories and substitutes are at that moment.
Four sensitive production regions are identified as worth watching: Maritime Southeast Asia, South Asia and Continental Southeast Asia, Eastern and Southeastern Australia, and South America. Zhang explains that each region's unique climate context can affect crop yields and prices. For example, a super El Niño can bring drier conditions to Maritime Southeast Asia, impacting palm oil and rice production.
Zhang emphasizes that agricultural pricing is not solely determined by weather anomalies but rather involves the interplay of multiple factors. She warns against treating weather narratives as if they were market truth, urging instead to consider the complex interactions between climate, production regions, crop calendars, and supply chains.