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SEB – Jordbruksprodukter, vecka 6 2012

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SEB Veckobrev Jordbruksprodukter - AnalysVi har hållit på skrivandet och utskicket av det här veckobrevet för att få med intrycken av WASDE-rapporten som släpptes av USDA klockan 14:30 igår torsdag. Rapporten, vars siffror nog förefaller vara övermåttan försiktigt justerade med anledning av torkan i Argentina, togs emot med något av en axelryckning av marknaden, men med tydliga prisnedgångar för alla grödor, mest för vete, där utgående lager justerades upp.

NOAA rapporterar i sin senaste synopsis att La Niña torde övergå till ”neutrala” ENSO-förållanden under perioden mars till maj 2012. Detta skulle betyda att hotet mot torka för norra halvklotets skörd kraftigt har minskat. Detta är klart negativ information för marknaderna för majs, vete, sojabönor och raps.

Vete

Terminspriset på Matif-vete (november) föll kraftigt till 193.50 euro / ton efter WASDE-rapporten

Prisutveckling på vete (mill wheat euro) under 2011 och 2012

Marknadens oro över ett ryskt exportförbud har kvarstått under veckan och de blandade budskap som kommit från Rysslands regering har orsakat en viss förvirring.

Rysslands premiärminister Viktor Zubkov sa att med tanke på att spannmålsskörden reviderats till 93,9 miljoner ton så har prognosen för spannmålsexporten 2011/12 höjts till 27 miljoner ton och att det därmed inte skulle finnas något behov av att införa restriktioner, vilket hade diskuterats till följd av den höga exporttakt som har rått.

SEB Veckobrev - Jordbruksprognoser den 10 februari 2012Det uttalandet kom strax efter att regeringskällor sa att Zubkov inte skulle meddela något beslut under fredagen och det i sin tur kom efter att vice premiärministern inte kunde uttala sig i frågan under torsdagen som tidigare angivits. De dubbla budskapen började dock redan på tisdagen då den biträdande jordbruksministern sade att ett beslut om export restriktioner skulle tas i mitten på februari, för att sedan skifta till att Zubkov skulle meddela beslutet under torsdagen.

Den snabba exporttakten av Rysslands spannmål har varit regerings främsta orosmoln genom att den skulle kunna driva upp de inhemska priserna kraftigt med en ökad matinflation och högre kostnader för animalie producenter som följd. Men eftersom spannmålen för export från gårdar och silos i närheten av hamnarna vid Svarta havet börjar sina så tvingas handlarna att se sig om efter spannmål längre in i landet vilket innebär långväga transporter på landets järnvägsnät som också bidrar till högre kostnader.

Det kalla vädret har också varit en bidragande faktor till oro. I Ryssland verkar dock snötäcket skydda de flesta grödor medan det kalla vädret i Svarta havsområdet kan komma att orsaka skador på framförallt korn och raps. Trots det kalla vädret i Europa så är påverkan av rapsgrödorna i Tyskland och Frankrike dock mindre oroande. I Ukraina är problemen desto större med effekten av kylan på de grödor som redan har drabbats av en oerhört torr höst och där vissa delar av landet har fått mycket snö, på sina ställen upp till 50 cm, medan andra delar av landet helt saknar snötäcke grödorna därmed exponeras för den extrema kylan. Med en mild höst och en ”varm vinter” kan det hända att grödorna blir något mindre vinterhärdiga än förväntat men det verkar dock som att de flesta europeiska länder har fått ett skyddande snötäcke mot kylan, även om det på vissa ställen vore önskvärt med ett större snödjup. Ännu är det dock för tidigt att sia om eventuella konsekvenser. Nedan ser vi WASDE-rapportens estimat för global veteproduktion.

Sammanställning över veteproduktion år 2009, 2010, 2011 och 2012

Indien, Kazakstan och Marocko har justerat upp sina produktionsestimat, vilket slår igenom i en högre global produktion.

Vetelager (world wheat end stocks) år 2009, 2010, 2011 och 2012

På konsumtionssidan är det främst Indien, som beräknas konsumera 1.6 mt mindre än i januari. Konsumtionen i EU och resten av världen är oförändrad, trots ett mycket högre pris än förra månaden. Men summa summarum – vi har trots allt ett högre utgående lager av vete än förra månaden.

Vi vet sedan tidigare att USDA har en tendens att fortsätta med justeringar ”åt samma håll”. Vi kan alltså förvänta oss högre uppjusteringarna av utgående lager att fortsätta, månad för månad, i WASDE-rapporterna och detta bör understödja en trend av sjunkande priser på vete. Nedan ser vi kursdiagrammet på decemberkontraktet på CBOT.

Terminskurva för vete (wheat future) för december 2012-terminen

Maltkorn

Maltkornsmarknaden har behållit sin styrka relativt andra spannmål med novemberleverans på Matif på 250 euro per ton.

Prisutveckling på maltkorn - Diagram för 2011 och början av 2012

Potatis

Nedan ser vi kursdiagrammet på europeisk potatis, som handlas på Eurex; terminen avser leverans april 2013.

Europeisk potatis (euro potato) - Prisutveckling termin april 2013 på Eurex

Majs

Majspriset föll något lite när börsen öppnade efter USDA-rapporten, som vi ser i kursdiagrammet för decemberkontraktet nedan:

Corn future (termin på majs) - Kursdiagram för december 2012-terminen

WASDE-rapporten visade dock på lägre produktion och lägre – rekordlåga utgående lager.

WASDE - Produktion av majs - 2009, 2010, 2011 och 2012

USDA justerade ner skörden i Argentina i spåren av torkan, från 26 mt till 22 mt. 22 mt ligger på den högsta nivån som vi sett inhemska Argentinska prognosmakare förutspå, som ligger i intervallet 18 – 22 mt. Produktionen skulle alltså ha kunnat minska med 8 mt istället för de 4 mt som USDA förutspår nu i sin februarirapport. USDA gör ingen justering för Brasiliens skörd, vilket stämmer någorlunda bra med vädret där.

Lager av majs (corn) - WASDE-rapporten för 2009, 2010, 2011 och 2012

USA:s utgående lager som anges i WASDE:n ligger på den lägsta nivån sedan 1975/76 och utgående lager på global basis i förhållande till konsumtion ligger på 1973 års nivå, som vi ser i nedanstående diagram.

Graf från USDA över lager av majs

Med ett förmodligen större bortfall från produktion och export från Argentina, måste detta kompenseras med lägre lager i USA. Det kan alltså bli ett riktigt lågt utgående lager i USA – och på global basis.

Å andra sidan väntas amerikanska bönder välja att så majs på bekostnad av sojabönor i vår. Ett högre pris på majs skulle öka denna tendens.

Sojabönor

Priset på sojabönor föll efter WASDE-rapporten i linje med de andra grödorna. Tekniskt är situationen intressant. Det finns de, bland annat SEB:s tekniska analytiker, som pekar på att det sedan september bildats en omvänd ”head-and-shoulders” formation, där ”nacklinjen” (grön linje) bröts i månadsskiftet januari – februari. Den skulle signalera en förestående potentiell prisuppgång till 1400 cent / bushel. Prisuppgången har dock stoppats av motståndet som utgörs av toppen som noterades i slutet av oktober. Skulle vi få en uppgång över 1267 får vi anse att vi har en teknisk köpsignal.

Soybean future - Diagram över prisutveckling på sojabönor år 2011 och 2012

Nedan ser vi USDA:s produktionsestimat från WASDE-rapporten igår.

Soybean - Världsproduktion av sojabönor år 2009, 2010, 2011 och 2012

Argentinas och Brasiliens skörd sänks med 2.5 mt respektive 2 mt i spåren av torkan. Bland ”Others” hittar vi Paraguay och Uruguay och de justeras ner 1 mt också.

Soybean - Lager av sojabönor år 2009, 2010, 2011 och 2012

Utgående lager sänks 3 mt. Argentinas skörd ligger i det övre intervallet av inhemska skördeestimat. Det känns som om man tagit i lite i underkant i justeringen och det är vanligt att USDA gör så. Vi kan alltså vänta oss att det ligger ytterligare en nedjustering sparad till nästa månad.

Vi är negativa ur tekniskt perspektiv de närmaste tre månaderna.

Raps

Priset på raps har gått starkt och hejdats på 430, uppenbarligen ett motstånd. Prisuppgången dit är ungefär lika lång från 410 – botten på rekylen i uppgången från 390. Det är 20 euro i båda rusningarna uppåt. Det är vanligt att man ser den typen av rörelser, där det är lika långt från ”halvvägskonsolideringen” uppåt som nedåt. Detta skulle indikera att den kortsiktiga uppgången är över. Vid 440 finns ett större motstånd, där priset vände ner i maj-juni förra året. Detta är alltså ett högt pris i ett historiskt perspektiv och säljvärt, tror vi.

Raps (IJX2) - Diagram över prisutveckling för terminer

Mjölk

Nedan ser vi priset på marskontraktet på flytande mjölk (kontakt avräknat mot USDA:s prisindex). Priset har som vi ser fallit kraftigt i februari. Marknaden är ”översåld” och ”borde” få en kortsiktig rekyl uppåt den närmaste veckan.

Milk future - Prognos över prisutveckling på mjölk - Februari 2012

Gris

Priset på lean hogs har segat sig uppåt och befinner sig nu återigen i sälj-området. Nedan ser vi terminspriset för leverans i maj.

Gris (lean hogs) - Prognos på pris - Analys februari 2012

Valutor

EURSEK som fanns stöd på 8.80 kr och steg till 8.90 har vänt ner igen och ska sannolikt testa 8.80 igen.

Valutadiagram för EUR SEK den 9 februari 2012

EURUSD har vänt upp och har precis lämnat en konsolidering – kanske halvvägs på väg upp mot 1.35 dollar.

Valutadiagram för EUR USD den 9 februari 2012

USDSEK har fallit av och tycks vara på väg nedåt.

Valutadiagram för USD SEK (x-rate) den 9 februari 2012

[box]SEB Veckobrev Jordbruksprodukter är producerat av SEB Merchant Banking och publiceras i samarbete och med tillstånd på Råvarumarknaden.se[/box]

Disclaimer

The information in this document has been compiled by SEB Merchant Banking, a division within Skandinaviska Enskilda Banken AB (publ) (“SEB”).

Opinions contained in this report represent the bank’s present opinion only and are subject to change without notice. All information contained in this report has been compiled in good faith from sources believed to be reliable. However, no representation or warranty, expressed or implied, is made with respect to the completeness or accuracy of its contents and the information is not to be relied upon as authoritative. Anyone considering taking actions based upon the content of this document is urged to base his or her investment decisions upon such investigations as he or she deems necessary. This document is being provided as information only, and no specific actions are being solicited as a result of it; to the extent permitted by law, no liability whatsoever is accepted for any direct or consequential loss arising from use of this document or its contents.

About SEB

SEB is a public company incorporated in Stockholm, Sweden, with limited liability. It is a participant at major Nordic and other European Regulated Markets and Multilateral Trading Facilities (as well as some non-European equivalent markets) for trading in financial instruments, such as markets operated by NASDAQ OMX, NYSE Euronext, London Stock Exchange, Deutsche Börse, Swiss Exchanges, Turquoise and Chi-X. SEB is authorized and regulated by Finansinspektionen in Sweden; it is authorized and subject to limited regulation by the Financial Services Authority for the conduct of designated investment business in the UK, and is subject to the provisions of relevant regulators in all other jurisdictions where SEB conducts operations. SEB Merchant Banking. All rights reserved.

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Analys

Metals price forecast: Lower Before Higher

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SEB - analysbrev på råvaror

Lower before higher

SEB - Prognoser på råvaror - Commodity

The world is slowing down along with fiscal and monetary tightening. The rapid rise in interest rates this year will work with a lag so the slowdown in the real economy is likely to continue. We expect metals prices to ease along with that. The continued deterioration in the Chinese property market is likely structural with growth shifting towards higher value sectors including green energy and EVs. Chinese credit expansion has started. Stronger demand for metals like copper, nickel and aluminium is likely to emerge in H2-23. Strong prices for metals over the coming decade due to sub-par capex spending over the past decade is likely.

Bjarne Schieldrop, Chief analyst commodities at SEB
Bjarne Schieldrop, Chief analyst commodities, SEB

Weakening macro and weakening demand. The world is now in the grip of a tightening craze amid inflation panic which was the result of the stimulus boom ignited by Covid-19 panic. The US expanded its M2 monetary base by 30% of GDP during the stimulus boom. Donald Trump earlier clamped down on immigration from Mexico/Latin America. Rampant consumer spending on capital goods together with an ultra-tight labor market then led to intense inflation pressure in the US. But also, in many other countries which also stimulated too much. The US is ahead of the curve with respect to interest rate hikes. The USD has rallied, forcing many central banks around the world to lift rates to defend their currencies as well as fighting their own inflationary pressures. The Japanese central bank has refrained from doing so and has instead intervened in the yen currency market for the first time since 1998. The year 2022 will likely be the worst selloff in global government bonds since 1949 as interest rates rise rapidly from very low levels. This is taking place following a decade where the world has been gorging on ultra-cheap debt. There is clearly a risk that something will break apart somewhere in the financial system as the world gallops through this extreme roller coaster ride of stimulus and tightening. On top of this we have and energy crisis in Europe where natural gas prices for year 2023 currently is priced at 700% of normal levels. War in Ukraine, risk for the use of nuclear weapons, an enduring cool-down of the Chinese property market and continued lock-downs in China due to Covid-19 is adding plenty of uncertain elements.

Downside price risks for metals over the coming 6-9 months. The significant rise in rates around the world will work with a lag. There can be up to a 12-month lag from rates starts to rise to when they take real effect. Continued economic cool-down in the economy is thus likely. Chinese politicians seem unlikely to run yet another round of property market-based stimulus. As such there are clearly downside risks to global economic growth and industrial metals prices over the coming 6 months.

China may be a “White Swan Event” in H2-23 onward. LME’s China seminar in London on Monday 24 October this year was very interesting. The brightest spot in our view was Jinny Yang, the Chief China economist at ICBC Standard Bank. She stated that China may turn out to be a “white swan event” in H2-2023. Further that the Chinese economy now is on a decade long type of transition period. Away from property focused growth. With a shift instead to technology and innovation, telecoms and energy transition, consumer demand side economy and higher value and more advanced sectors. The property market will be a fading sector with respect to growth. Chinese politicians are fully committed to the energy transition. No slowdown in there. Credit expansion has already started. The real effect of that will emerge in H2-23. The new growth focus will be different from before. But it will still imply lots of metals like aluminium, copper, nickel, zinc, cobalt, manganese, and other special metals. There will be less copper for pipes and wiring for housing but there will be more copper for EVs, Solar power, Wind power and power networks etc.

Copper: Struggling supply from Chile, rising supply from Africa while Russian exports keeps flowing to market. The Chinese housing market normally accounts for 20% of global copper demand. So, slowing Chinese housing market is bad for copper. Russian exports keep flowing to SE Asia where it is re-exported. Good supply growth is expected from Africa in 2023. Supply from Chile is struggling with falling ore grades, political headwinds, and mining strikes. Demand is projected to boom over the coming decades while investments in new mines have been sub-par over the past decade. So strong prices in the medium to longer term. But in the short-term the negative demand forces will likely have the upper hand.

Nickel: Tight high-quality nickel market but surplus for low-quality nickel. There is currently a plentiful supply of low-grade nickel with weak stainless-steel demand and strong demand for high quality nickel for EV batteries. The result is a current USD 5-6000/ton price premium for high-quality vs. low-quality nickel. High-quality LME grade nickel now only accounts for 25% of the global nickel market. Over the coming decade there will be strong demand growth for high-quality nickel for EV batteries, but high-quality NiSO4 will take center stage. The price of high-quality nickel over the coming decade will depend on how quickly the world can ramp up low-grade to high-grade conversion capacity.

Aluminium: Russian production and exports keeps flowing at normal pace to the market through different routes. Supply from the western world set to expand by 1.3 m ton pa in 2023, the biggest expansion in a decade. Demand is projected to grow strongly over the decade to come with energy transition and EVs being strong sources of demand. Western premiums likely to stay elevated versus Asian premiums to attract metal. Increasing focus on low carbon aluminium. But weakness before strength.

SEB commodities price forecast:

SEB commodities price forecast

Chinese credit cycle vs industrial metals. Chinese credit expansion has already started.

Chinese credit cycle vs industrial metals
Source: SEB calculations, data from Blberg

This report has been compiled by SEB´s Commodity Research, a division within Skandinaviska Enskilda Banken AB (publ) (”SEB”), to provide background information only.

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Analys

Europe’s energy policy unravels a potential advantage for US energy over Europe

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WisdomTree
WidsomTree

The clock is ticking for Europe to shield its economy amidst the current energy crisis. The cost of electricity across the European bloc is nearly 10 times the 10-year average in response to Russia cutting back natural gas supplies in retaliation to sanctions. There has been a substantial increase in the share of supply of Liquidifies Natural Gas (LNG) and alternative suppliers as a direct replacement of waning Russian gas supply.

Figure 1: Natural gas flows in the European market, first half 2022 versus first half 2021

Karta hur importen av naturgas till Europa har förändrats
Source: Bruegel, WisdomTree as of 6 September 2022. Please note: Arrows width indicates size of 2022 flow.

European leaders are racing to come up with a plan on energy intervention in the power markets. One of the measures being touted is imposing an energy windfall tax on oil and gas profits to help households and businesses survive this upcoming winter season. The plan is to re-channel these unexpected profits from the energy sector to help domestic consumers and companies pay these high bills. The windfall tax on the oil and gas companies should be treated as a “solidarity contribution,” according to European Commission (EC) President, Ursula von der Leyen.

Imposing a windfall tax on those profiting from the war

A windfall tax would impose a levy on the revenues generated by non-gas producing companies when market prices exceed €200 per megawatt hour (Mwh) and redistribute excess revenues to vulnerable companies and households. There has been greater consensus among other European Union (EU) countries on the windfall tax compared to other parts of the European Commission’s 5-point plan. This includes – setting a price cap on Russian gas, a mandatory reduction in peak electricity demand, funding for ailing utility companies, a windfall tax on fossil fuel companies and changes to collateral requirements for electricity companies. The EC’s plan will need to meet the approval of the bloc before being enforced. The most controversial issue remains the Russian price cap – aimed at penalising Russia for weaponising energy.

Coordinated energy policy needed despite different energy mix across EU bloc

There are major differences between member states based on those that rely on coal, nuclear or renewable power owing to which imposing a one energy policy will be challenging. Austria, Hungary, and Slovakia, known to import large amounts of Russian gas are against the price cap on Russian gas. On the other hand, a number of  EU countries including France, Italy, and Poland, support a cap, but argue it should apply to all imported forms of the fuel, including LNG. Germany is undecided but fears the disagreements on the price caps risk spoiling EU unity. Spain, a big generator of wind and solar power was quick to draw criticism of the proposed €200/Mwh as it does not correspond to the real costs and fails to support electrification and the deployment of renewables.

In the US, various Senators including Senate Finance Chair Ron Wyden, have proposed legislation that would double the tax rate of large oil and gas companies excess profits. However, given the current political climate it seems increasingly unlikely that these proposals would gain any traction in Congress.

Europe’s energy policy likely to put a strain on capex in the near term

Since the oil price plunge from 2014 to 2016 alongside climate change awareness and Environmental Social and Governance (ESG) mandates, the energy sector saw a sharp decline in capital expenditure (capex). Since then, capex in the global energy sector has failed to attain the levels last seen at the peak in 2014. While capex trends in Europe’s energy sector had begun to outpace that of the US, driven mainly by a rise in the share of spending on clean energy, we believe the impending energy crisis and energy policy including the national windfall levies in Europe are likely to disincentivise capex in Europe compared to the US over the medium term. High prices are encouraging several countries to step up fossil fuel investment, as they seek to secure and diversify their sources of supply.

Source: Bloomberg, WisdomTree as of 31 August 2022.

The divergent energy policies and prevalent supply situations in the US and Europe opens up a potential opportunity in the energy sector. The energy sector has been the unique bright spot in global equity markets in 2022 posting the strongest earnings results in H1 2022. Despite its strong price performance, the US energy sector trades at a price to earnings (P/E) ratio of 8x and has a dividend yield of 3%. In September 2008, the energy sector had a 12.5% weight in the S&P 500 and was the fourth largest sector by market capitalisation in the world’s largest economy and equity market. Fast forward to today, the energy sector accounts for only 4% of the S&P 500 Index. While the future trajectory is greener, the world has come to terms with the fact that we will require oil and gas in the interim in order to fulfil our energy requirements. Investment is increasing in all parts of the energy sector, but the main boost in recent years has come from the power sector – mainly in renewables and grids – and from increased spending on end-use efficiency. As Europe plans to reduce its reliance on Russian energy supply, it will become more reliant on US LNG imports. This should fuel further investment in the US energy sector in the interim.

Aneeka Gupta, Director, Macroeconomic Research, WisdomTree

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Agricultural commodities could offer a hedge against inflation

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WisdomTree
WidsomTree

Agricultural commodity prices have been buoyed higher by rising grain and oilseed prices. At a time, when global equities have sold off by nearly 13.88% amidst soaring inflation and tightening liquidity conditions, agricultural commodities are up 26.8%. There are a plethora of supply side issues emanating from the war that are likely to continue to drive prices higher – the rise of protectionism, higher fertiliser costs, changing biofuel mandates and adverse weather conditions to name a few. The Russia-Ukraine war has had ripple effects from disrupting supply chains to raising fertiliser costs.

Rising protectionism buoys agricultural commodities higher

The war-related disruptions have also given rise to protectionism. To cite a few examples in 2022– India, the world’s third largest wheat producer, announced it would restrict wheat exports to manage domestic supplies of the grain, which led to a sharp rise in wheat prices. Indonesia also announced an export ban on palm oil on April 28, but the ban was lifted on May 19 after hundreds of farmers rallied to protest the move. In a tight oil-seeds markets, the initial announcement led soybean oil, an alternative to palm oil, sharply higher.

Source: WisdomTree as of 7 June 2022

Higher biofuel blending mandates to bolster demand for corn and soybean oil

Changes in the biofuel blending mandates are also poised to increase demand for agricultural commodities. The US is home to the world’s largest biofuel market. The Biden administration is ordering refiners to boost the use of biofuels such as corn-based ethanol. The US Environmental Protection Agency (EPA) is requiring refiners to mix 20.63 billion gallons of renewable fuels into gasoline and diesel this year, marking a 9.5% increase over last year’s target. This will put pressure on refiners to blend more biofuel into their gasoline production this year, resulting in a net positive impact on the biofuels industry. Grains such as corn stand to benefit owing to their high starch content and relatively easy conversion to ethanol. Amidst waning stockpiles of diesel, Brazil is also considering increasing the biodiesel blend to 15% from 10% (i.e. the amount of soybean oil blended into trucking fuel). This has the potential to bolster demand for soybeans at a time when soybeans are already in short supply due to droughts in South America and US plantings trail last year’s pace.

Rising fertiliser costs are weakening demand, in turn lowering yields

The Russia-Ukraine conflict has caused disruptions in fertiliser production and material price increases, which has put farmer margins and agricultural yields at risk elsewhere, driving the prices of most agricultural commodities higher. Russia and Ukraine account for a significant share of the global fertiliser trade. Russia produces 9% of global nitrogen fertiliser, 10% of global phosphate fertiliser, and 20% of global potash fertiliser. It exports more than two thirds of its production of each product. Belarus produces an additional 17% of global potash and exports most of it.

Owing to its high soil quality, Argentina tends to use less fertilisers, but Brazil (the world’s largest importer of fertilisers) of which 85% of its needs are imported, is likely to feel the impact more. Russia alone accounts for 25% of Brazil’s total fertiliser imports. Farmers can also plant more soybeans, which require less fertilisers than corn. The US and global corn balance are set to continue to tighten, which suggests that the current high price environment is set to linger. The high prices and low availability of fertilisers is making farmers reduce usage and is also resulting in lower fertiliser prices similar to the trend witnessed back in 2008.

Ammonia prices
Source: Bloomberg, WisdomTree as of 27 May 2022.

Speculative positioning garnering momentum among agricultural commodities 

According to data from the Commodity Futures Trading Commission (CFTC), net speculative positioning in agricultural commodities has risen considerably since the covid pandemic. Tighter supply coupled with stockpiling by national governments concerned about food security has led to a rise in agricultural commodity prices. Not only has net speculative positioning on agricultural commodities risen versus its own history but also in comparison to other commodity subsectors, as illustrated in the chart below:

Speculative positions
Source: WisdomTree, CFTC, Bloomberg as of 25 May 2022.

Adverse weather conditions impact agricultural commodities

El Niño and La Niña are the warm and cool phases of a recurring climate pattern across the tropical Pacific—the El Niño-Southern Oscillation, or “ENSO” for short. The pattern shifts back and forth irregularly every two to seven years, and each phase triggers predictable disruptions of temperature, precipitation. The current La Niña has been around since October 2021. It has been responsible for the South American droughts, milder weather in Southern parts of US and heavy rainfalls across the Pacific Northwest. There is a 51% chance La Niña could continue into the December to February period, with those odds down from last month’s forecast of 58% according to the US climate prediction centre. The waters across the equatorial Pacific Ocean are expected to stay cool or be close to normal between June and September, which means the influence on weather patterns won’t be enough to disrupt tropical storms and hurricanes in the Atlantic.  

Conclusion

Agricultural commodities have posted a strong performance in 2022. Yet there remain plenty of factors that could drive the performance of this commodity subsector even higher. Agricultural commodities are unique owing to their high dependence on weather conditions that make them volatile but also offer diversification benefits.

Aneeka Gupta, Director, Macroeconomic Research, WisdomTree

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