Reactions to the arrival of this year’s El Niño have been mixed. Some parts of the world fear the floods, the opposite drought, the scorching heat and the frigid winters. But regardless of the manifestations, the world’s essential commodities could be in for a good ride in this El Niño.
Jodie Gunzberg, global head of commodities at S&P Dow Jones Indices, said that commodities in the agriculture, energy, industrial metals, livestock and precious metals are going to experience bountiful returns after this El Niño. Gunzberg said in a blog that researchers have undertaken a study to assess the impacts of the El Niño on these sectors after the weather phenomenon had dissipated. While five sectors got disrupted, all of them still posted positive returns in the 12 months following the El Niño periods.
“Since the El Niño of 1982-1983, commodity sector returns, except for livestock, have increased through time in each of the 12 months following the temperature rise,” Gunzberg said. The average annual increase using El Niño periods was 2.6 percent for agriculture, 2.0 percent for energy, 1.8 percent for industrial metals and 2.4 percent for precious metals.
The National Oceanic and Atmospheric Administration (NOAA) predict the El Niño conditions will continue through this summer by 90 percent. It has an 80 percent chance it will continue through the entire 2015.
“This El Niño may be just another potential boost with a little more octane…that can act as a catalyst for commodities,” Gunzberg said.