Wall Street coverage of a record-breaking Super El Niño is only growing as agricultural commodities break out. Yet the rally extends well beyond the agricultural complex, with industrial metals and other critical materials showing signs of tightness in physical markets.
Whether it is veteran commodities strategist Jeff Currie turning bullish or UBS urging clients this week to "position for a commodity upcycle," the message is becoming louder: Commodity markets are tightening as adverse weather, years of underinvestment, declining inventories, and China's restrictions on critical-material exports converge into what appears to be an emerging supply shock.
Focusing on the agricultural complex, Craig Rye, a sustainable investing research analyst at Barclays, wrote in a note on Friday that El Niño is strengthening in the tropical Pacific, threatening to disrupt global agriculture, energy production, and industrial commodity markets.
Rye cited new multi-model forecasts from the International Research Institute for Climate and Society showing that the El Niño index could peak near 3.2 degrees Celsius between late 2026 and early 2027. If realized, the event would be about 15% stronger than the 2015-16 Super El Niño.
Rye explained:
Rising confidence in a historic El Niño increases the likelihood of significant disruptions across agricultural, energy and industrial commodity markets. Historical El Niño events have often been associated with
Rye expects the largest near-term risks concentrated in weather-sensitive agricultural commodities. Palm oil, coconut oil and rubber could climb 30% to 40% over the next 18 months, while robusta coffee could rise 20% to 30%. Rice prices may advance 10% to 20% as drought threatens crops and water supplies across Southeast Asia and parts of Central America.
He warned that the supply shock could then spread into industrial commodities, expecting aluminum and copper to gain as much as 20% over 18 months, while thermal coal could surge 20% to 40%. Mining disruptions, reduced hydropower generation and shifting electricity demand would amplify the effects of drought and extreme weather.
Rye identified Bunge and Archer-Daniels-Midland as potential agricultural beneficiaries. Norsk Hydro, South32 and Rio Tinto could benefit from higher aluminum prices, while Freeport-McMoRan, Hudbay Minerals, First Quantum Minerals and Southern Copper offer exposure to the bank's bullish copper scenario.
The most important reads this week:
2. Got Hard Assets? UBS Says "Position For A Commodity Upcycle" As Global Scarcity Emerges
3. Zinc Hits Four-Year High As "Extremely Thin" Physical Supply Fuels Squeeze
4. US Tungsten Scrap Export Ban Takes Effect As Global Supply Crisis Deepens
5. Wheat Futs Surge To Three-Year High As JPMorgan, HSBC Warn Global Food Shock Is Brewing
6. "Buffers Running Down Quickly": HSBC Warns Next Global Food Shock Brewing
7. Uranium Awakens From Five-Month Slumber As UBS Warns Market Is "Tightening Structurally"
8. The AI Boom Runs On Tungsten, But Global Supplies Are "Running On Empty"
9. Diesel Crack Spread Madness Deepens As Jefferies Finds No Easy Exit From Russia's Refining Crisis
Across all commodities, here are the latest X trends:
1. Warsh Jackson Hole smash: gold -3%, silver -3% to -4.5%
Fed Chair Kevin Warsh's hawkish JH remarks (inflation "not meaningfully" improved, 2% target firm, hike still live) sent COMEX gold down ~$130-$150 to ~$4,478-$4,530 and silver off $2-$3 to the mid-$60s. Dollar to a 2-week high; 10y near 4.7%. @AstraInsights: gold's 2nd-worst Jackson Hole reaction on record (behind 1990).
2. Hormuz "open" vs IRGC reality check — oil weekly loss on a contested narrative
WTI/Brent booked ~4-6.5% weekly losses as traders priced in more Hormuz throughput and a possible US-Iran off-ramp. Weekend X counters: @Currentreport1 (video of queued ships; IRGC accuses US of talking the strait open to cap prices); @MenchOsint (UAE-managed tanker ELLIE turned around after attempting the US-backed southern corridor).
3. Venezuela 65-billion-barrel "deal" goes viral on X
@GuntherEagleman and copy-accounts pushing Trump/Rubio/Hegseth + Delcy Rodríguez pact: majority US control of 65bn barrels, 17 fields, $100bn private capex, "zero taxpayer cost." High engagement overnight; pushback thread from @EmmaRincon (4.8k likes) that the interlocutor choice hands the Latin left a decade of ammo. Capital Economics already asking what a US-Venezuela heavy-sour deal does to Canadian/Mexican barrels.
4. Wheat to a 3-year high as Black Sea crisis deepens
WSJ tape and @staunovo: wheat jumped ~3% Friday toward $7.60-$7.83 as strikes hit grain ships and export terminals. Region still ~1/3 of global wheat exports.
5. Europe gas storage winter-panic: EU ~63%, Germany ~51%, NL ~44%
Guardian (Sat) + OilPrice: EU stores ~63% late August vs ~80% seasonal norm; lowest for the date in ~13-20 years. Qatar LNG force-majeure hangover from the Iran war; TTF still ~€66-70. Henry Hub ~$2.87 is a different planet.
6. Copper still near records; El Niño hitting mine-to-port chains
LME copper ninth weekly gain into record zone (~$14.2-$14.5k/t) even as Friday faded. @robert_ivanhoe: Chile flood outages + PNG drought starving Ok Tedi river shipments. AI/data-center + grid demand vs falling grades.
7. Zinc four-year high on collapsing inventories
@steve_hanke: zinc at a four-year high as mine disruptions bite; LME inventories cited down ~65% YTD and lowest since Apr 2023. Friday pullback from the spike but weekly still green.
8. Crack-spread / product vs crude divergence
RBOB +2% Friday while WTI was flat-to-down. Heating oil also firmer.
9. Palladium spike (+5% Friday) while gold/silver dumped
Palladium ripped as gold and silver were smashed — a split inside precious/PGMs. Why ZH: auto/catalyst + Russia-supply overlay vs rate-sensitive bullion. Unusual relative-value print.
10. Silver technical break after $71-$72 rejection
Silver printed a $72 high then confirmed a double-top / failed breakout into the mid-$60s. Gold/silver ratio still elevated.
11. Iran exported ~90mn barrels during the ceasefire window
@MarioNawfal citing President Pezeshkian: ~90mn bbl / ~$6.5bn exported during the post-MoU ceasefire.
12. Saxo weekly: scarcity rally broadening — then energy decoupled
Ole Hansen (28 Aug): barrels-to-bushels-to-bullion scarcity theme; precious +~15% in August before the Warsh flush; copper/zinc exceptions in industrials; energy the odd man out as Hormuz hopes grew.
13. Cocoa melt-up (ICE/London +7-8% Friday)
Cocoa ripped several percent into the weekend after an already violent year.
14. Tin two-month high — Indonesia licenses + AI/memory demand
CNBC-TV18 commodity desk: tin bid on Indonesian export-license cuts and chip/AI demand.
15. Capital Economics: "Beyond Hormuz — path back to an oil glut"
House view that traders have already priced a lot of the Gulf-export recovery; residual Q3/Q4 volatility then glut.
16. Asia crude imports still not showing a Hormuz rebound
Investing.com/Paraskova: Asia expected to take roughly July-like volumes in August; ship-tracking optimism has not yet shown up in Asian arrivals.
17. US-Iran talks off / sanctions still tightening — two-way oil risk
Trump told mediators he will not return to June ceasefire terms; new sanctions packages still in the tape even as prices fell.
18. Uranium holding ~$90 as energy complex bifurcates
U3O8 around $89-90, modest weekly green while crude sold off.
19. Treasury buybacks vs Warsh hike-talk — policy schizophrenia trade
X gold accounts hammering the contradiction: Treasury long-bond buybacks to cap yields vs a Fed chair threatening hikes.
20. Weekend positioning: dip-buy gold vs fade oil-peace
Retail/pro X split — gold CTAs and stackers calling the Warsh smash a "hide the debasement" hit; oil bulls warning Hormuz AIS games. Next catalysts: JOLTS, ISM, payrolls, any IRGC/tanker incident, Venezuela legal text.
A look at the Quantix Commodity Index Total Return shows that the broad commodity complex has surged to a record high, gaining more than 22.5% since late June. The index tracks 24 US-dollar-denominated futures across energy, agriculture, livestock, industrial metals, and precious metals, suggesting the rally is no longer confined to a single corner of the physical world.
Currie's warned last week that "scarcity in the physical world" is reemerging.
Currie's conclusion was very blunt: "The illusion of abundance is likely behind us."
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.