On Thursday, October 14th, Eastern Time, the U.S. Climate Prediction Center stated that La Niña is coming and may last until at least February. The center said there’s a 57% chance of a mild event, and while it may take several months for scientists to confirm whether La Niña is indeed back, all signs point to it being here.
La Niña mainly refers to a phenomenon of abnormally cooling water in the central and eastern Pacific Ocean. Generally speaking, when La Niña occurs, climate anomalies in the equatorial low-latitude areas on both sides of the Pacific Ocean will be more obvious, which will affect the temperature, precipitation, and storm patterns in many areas of the world, and have a certain impact on normal production activities.
The current weather pattern may mark the arrival of the second consecutive La Nina in the world, and the arrival of La Nina will have a huge impact on global crop markets There is a saying that “droughts will kill droughts, and floods will die”, which is not an exaggeration in the face of La Nina.
South American crops may face extreme drought. For example, the ongoing drought in California cannot be alleviated and will make the upcoming wildfire season more severe; corn, coffee and soybeans have been hit hard in southern Brazil and Argentina. etc. will be hit harder; at the same time, palm oil across Indonesia will be greatly affected by the increase in floods.
CICC believes that the anomalies in global precipitation and temperature caused by La Niña weather have different impacts on different industries/industries. Specifically, on the one hand, deviations in precipitation and temperature from normal values will directly have a certain impact on global agricultural production. At the same time, the occurrence of La Niña phenomena often leads to large fluctuations in market sentiment, which in turn promotes irrational increases in agricultural product prices. On the other hand, the cold weather that may be caused by the La Niña climate may be beneficial to energy, coal, textile and clothing chemical fiber, urea fertilizer and other related industrial chains, exacerbating market concerns about winter energy shortages, and pushing up the price of natural gas, heating oil, coal to a certain extent. , cotton textiles, chemical fertilizers and other bulk commodity prices.
The La Niña climate may intensify commodity price fluctuations
Previously, rising raw material and energy prices exacerbated inflation, and commodities Commodity price indexes hit their highest levels in a decade or even on record.
Bloomberg Commodity Spot Index, which tracks 23 energy, metal and crop futures contracts, rose 1.1% on Monday, surpassing its peak set in 2011, Bloomberg data showed. The index is up more than 90% since hitting a four-year low last March. Specifically, the biggest increases were in energy commodities such as natural gas and oil.
According to agency reports, La Niña climate may intensify commodity price fluctuations.
1. Disturbances from weather factors may intensify the price fluctuations of related agricultural products
After 2000, a total of 6 La Niña climates occurred in the northern hemisphere winter, and CBOT soybean prices were at There were five increases in La Niña winter (from November of that year to February of the following year), with the average price increasing by 18.2% (the average increase in the same period in 2020 was 8.2%); CBOT wheat prices increased six times, with the average price increasing by 16.3% (20 The average growth rate during the same period last year was 8.2%).
2. During “La Niña”, energy price performance is generally stronger than seasonality
In the past six La Niña periods, Brent crude oil and heating oil futures prices The average increases were 19.3% and 16.1% respectively, significantly higher than the average levels of the same period in the past 20 years (1.6% and 1.8%). Newcastle thermal coal futures rose by an average of 12.8% during the “La Niña” winter, higher than the average for the same period in the past 20 years (3.3%).
In terms of industrial products, in La Niña years, the S&P Industrial Products Index rose by an average of 9.7%, slightly exceeding the average position of 4.5% in the past 20 years.
3. The current cotton supply is temporarily tight, and short-term prices still have room to rise
On the supply side, according to September data from the Ministry of Agriculture and Rural Affairs, on 21/ The national cotton output in 2022 is expected to be 5.73 million tons, a year-on-year decrease of 3.05%. At the same time, cotton imports are expected to be 2.5 million tons, a decrease of 300,000 tons from last year. Therefore, overall, the national cotton supply is less than the same period last year.
On the demand side, driven by the subsequent “Double Eleven”, Spring Festival and other festivals, ginning and textile mills will usher in the peak season. At the same time, major consumer countries in Europe and the United States are approaching Christmas and other holidays, and overseas orders are returning. Therefore, it is expected that the cold winter will further benefit exports and cotton prices.
4. The current low inventory coupled with the expectation of a cold winter will increase the risk of energy price increases in the fourth quarter
Currently, global commodity inventories related to power generation are generally at Low position. Overseas, U.S. natural gas inventory replenishment is slow in the off-season, and OECD heating oil inventories have fallen to the lowest level in history since July. Domestically, domestic thermal coal inventories have been continuously reduced since this year. The current thermal coal inventory of end users in eight coastal provinces has dropped to about 10 days, while the average number of days in the past five years has been around 14 days.
According to our calculations, the gap between my country’s natural gas supply and demand will continue to expand this winter. If the forecast for this year’s cold winter comes true, overseas demand for natural gas and heating oil may further rise, and domestic demand for coal and natural gas may even rise at the same time. We still need to pay attention to the upward risk of energy prices in the fourth quarter.
In addition, when energy shortages become more serious, we believe that the “double limit” measures on industry may be difficult to relax, and industrial…Product output will also be subject to certain constraints.
</p
