Meteorologists have extended the El Niño weather pattern outlook, potentially signalling greater disruptions to global crops and further support for soft commodities-related exchange traded funds.
Over the past month, the Teucrium Corn Fund (NYSEArca: CORN) jumped 11.1%, Teucrium Soybean Fund (NYSEArca: SOYB) gained 4.6% and Teucrium Wheat Fund (NYSEArca: WEAT) rose 6.0%.
Additionally, the diversified iPath Bloomberg Grains Subindex Total Return ETN (NYSEArca: JJG), which includes 45.3% corn, 35.4% soybeans and 19.3% wheat, has increased 10.7% over the past month. The United States Agriculture Index Fund (NYSEArca: USAG), which includes a broader basket of soybean, corn, wheat, cocoa, lean hogs, cocoa, coffee and cotton, was up 7.5% over the past month. The Teucrium Agricultural Fund (NYSEArca: TAGS), which takes an even exposure to sugar, wheat, corn and soybeans, was 7.8% higher for the month.
The Climate Predictions Center, an agency of the National Weather Service, believes that the likelihood that there is now an 80% chance El Niño could last through early spring 2016 across the Northern Hemisphere, reports Reuters reports.
The weather forecaster previous anticipated the weather pattern to last through the winter.
The weather phenomenon describes the warming sea-surface temperatures in the pacific, which can cause heavy rains and floods in South America and scorching hot weather in Asia and East Africa. The Climate Predictions Center warned that the effects of El Niño could intensify during the late fall and winter seasons.
“The main features right now are the ocean temperatures are quite warm for this time of year,” Michelle L’Heureux, a meteorologist at the center, told Bloomberg. “Right now, we have a pretty robust El Nino event going on.”
The changing weather conditions will affect agricultural commodities prices ahead, especially around the September planting season. For instance, Australia’s high-protein wheat crop will likely take a hit due to the drier conditions across the country’s eastern grain belt, Reuters reports.
Soybean production in India, Asia’s second-largest producer, could diminish El Niño causes dry conditions in the western and central regions of the country.
Chinese and Indian corn production, a water-intensive crop, could also fall. Consequently, U.S. and South American suppliers could export more to Asia.
For more information on the commodities market, visit our commodity ETFs category.
Max Chen contributed to this article.