Analysts are warning that a La Nina weather pattern is likely to impact a range of global %Commodities in this year’s second half, including agriculture, metals and energy products.
La Nina, which leads to extreme temperatures and storms, is going to disrupt global commodity markets and lead to volatile prices from this summer through to the end of winter, warn analysts.
Following the El Nino weather event in the second half of 2023 that led to a mild winter, the U.S. National Oceanic and Atmospheric Administration’s Climate Prediction Center estimates that there is a 70% likelihood of a La Nina developing and lasting through March 2025.
La Nina weather events typically bring warmer than normal winter temperatures in the South and colder than normal temperatures in the North.
Should a La Nina form this year, it will most certainly disrupt agriculture crops and cause turmoil in agriculture markets.
Brazil and Argentina will likely see increased soybean and corn yields due to higher rainfall, strengthening their export positions and lowering global prices for those commodities, say analysts.
However, some people warn that extreme rainfall could lead to flooding, damaging crops and causing supply shortages.
At the same time, farms in the southern U.S. are likely to face drier conditions, potentially worsening a drought that has impacted wheat, cotton, and sorghum yields in recent years.
Metals are also likely to be impacted by a La Nina as extreme weather could disrupt the extraction and transportation of raw materials, especially if there is heavy rainfall and flooding.
In the past La Nina’s extreme weather has led to flooding and landslides in countries such as Indonesia and Brazil, disrupting the extraction of copper, nickel and iron ore.
A La Nina is also expected to have an impact on the global energy sector, with extreme weather events disrupting extraction and refining operations for both crude oil and natural gas.
The National Oceanic and Atmospheric Administration is forecasting an “above average” Atlantic hurricane season this year, with as many as 13 hurricanes expected that could disrupt operations along the U.S. Gulf Coast that accounts for 15% of America’s crude oil production.
On the flipside, a colder winter in Europe and parts of North America could lead to a spike in demand for thermal coal and natural gas, pushing prices higher as a result.
