Prospect of El Niño blows crop prices higher
By Joshuah at 29 June, 2009, 5:41 pm
Toss in a little UG99 and you got yourself a real crisis…famine to add to the pestilence.
If there is a single weather pattern that strikes fear into agricultural and soft commodities markets, it is El Niño.The recurring climatic event – caused by an increase of the water temperature in the tropical Pacific – has in the past triggered wild gyrations of wholesale food prices, as it usually brings droughts to south-east Asia and Australia.
Traders and agricultural officials are nervously watching weather models for the possible development of an El Niño later this year – on the cards after August – after several countries, including Australia and the US, issued early weather warnings.
“With weather forecasts flagging that there is a larger than 50 per cent risk of an El Niño, this is going to get lots of market attention,” says Luke Chandler, director of agriculture commodity markets research at Rabobank in London.
Agriculture and soft commodities traders say the weather phenomenon has been on their radar, although most in the market agree that it is too early to say whether one will develop this year and what impact, if any, it will have on prices.
Daniel Guertin, a meteorologist at Barclays Capital’s commodities desk in New York, says the traders’ attention is warranted, taking into account the early signs.
“The waters in the tropical Pacific Ocean have warmed up substantially, and this is indicative of a developing El Niño later this summer or in the fall,” he says.
“Market chatter about a developing El Niño is justified.”
Source/Full Story: FT.com
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