Onset of La Nina weather phase raises concerns across commodity markets


(MENAFN) The onset of the La Niña weather phase is raising concerns across commodity markets due to its anticipated disruption and volatility. Forecasts by the US National Oceanic and Atmospheric Administration (NOAA) suggest that La Niña will begin at the end of summer, succeeding the El Niño phase that commenced in June last year and concluded in April 2024. El Niño, characterized by warmer-than-usual sea surface temperatures in the eastern Pacific Ocean and elevated atmospheric pressure across the western and central Pacific, significantly impacts global weather patterns. In contrast, La Niña is expected to manifest as cooler sea surface temperatures in the Pacific, particularly if the temperature remains below minus 0.5 degrees Celsius for three consecutive months.

The agricultural sector is projected to experience notable effects due to La Niña. In Brazil, increased rainfall could boost soybean production and drive prices down. However, excessive rainfall poses a risk of flooding, which could damage crops and disrupt logistics. Similarly, enhanced production of rice and palm oil in Indonesia and Malaysia may lead to lower prices. Conversely, drier conditions in the southern US are expected to negatively impact wheat and cotton production, while soybean yields in the Midwest are anticipated to rise.

In addition to agricultural commodities, the global metal markets, mining operations, and transportation activities across East Asia, Africa, and Australia are likely to face disruptions from increased rainfall and flooding. Zafer Ergezen, a futures and commodity markets expert, highlighted that La Niña will result in slightly milder climates with varying regional impacts. Northern US regions will experience wetter conditions, while the central and southern parts will see drier weather. Similarly, northern Brazil will be wetter, and southern regions hotter, while Europe will experience milder temperatures in the north.

Ergezen also pointed out that La Niña could lead to increased agricultural yields in countries like Indonesia and the Philippines, which may pressure commodity prices. The potential for hotter and wetter weather in Brazil could cause fluctuations in coffee and sugar prices, while US wheat and corn production might decrease due to contrasting weather conditions. The expert further noted that La Niña could coincide with some of the largest hurricanes in a decade, potentially impacting oil prices and causing freight and container prices to rise, particularly due to disruptions in transit through the Panama Canal.

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