Market Overview

How To Invest When El Niño Comes Around

How To Invest When El Niño Comes Around

This year, El Niño is forecast to upend weather patterns across the world and wreak havoc farmers, especially in regions where access to irrigation is limited.

The weather phenomenon is expected to cut down on rainfall in Australian and Southern Asia and create unusually wet weather in parts of South America.

The extreme weather conditions have pushed investors to take a closer look into agriculture investments as the difficult growing conditions could lead to price spikes.


Prices of wheat have seen a bump over the past two weeks after worries that El Niño would dry out wheat-producing regions. In Australia, where 14 percent of the world's wheat exports are grown, dryer than expected weather is forecast to significantly cut down on crop yields. The Teucrium Wheat Fund (NYSE: WEAT) has seen a 10.58 percent rise over the past month in the wake of the commodity's El Niño concerns.


Many investors are turning to coffee to give their portfolio a jolt, especially since both Vietnam and Indonesia are experiencing unusually dry weather. Both nations produce Robusta coffee, which is used in instant coffee and is very sensitive to reduced rainfall. For that reason, ETFs like iPath Bloomberg Coffee Subindex Total Return SM Index ETN (NYSE: JO) have become popular plays for El Niño investors.

Outside Agriculture

While agriculture is the most obvious place El Niño will have an impact, other areas of the market could also feel the pressure of unseasonable weather.

When El Niño hits, demand for commodities like crude oil and coal typically increases as thermo and hydroelectric power are more difficult to generate. The metals can also be impacted; in Chile wetter than normal weather could cut down on copper mining.


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