Our VIP articles have consistently highlighted this severe El Niño event; we wonder if any readers seized the opportunity. This global climate disturbance has triggered extreme weather in many parts of the world, with disasters such as wildfires in Asia, hurricanes in the Pacific, and the shutdown of fisheries in South America occurring one after another. The World Meteorological Organization warns that the strong El Niño will persist throughout the winter, with the risks of floods, droughts, and extreme heat continuing to escalate. For the commodity market, this super-climate event is not a short-term weather speculation, but a core trading theme reshaping the global supply and demand structure and driving structural differentiation among commodities. From a formation mechanism perspective, the core trading logic of El Niño stems from the systematic shift in global precipitation and water temperature. Under normal climate conditions, warm water accumulates in the western Pacific region, but during the El Niño outbreak, a large amount of warm water continuously moves eastward to the South American coast, directly rewriting global tropical atmospheric circulation and precipitation distribution. Sea surface temperatures in the central and eastern Pacific have now climbed to record highs, with many indicators surpassing previous super El Niño cycles. This means that the impact and duration of this climate event on global industrial and supply chains will far exceed those of ordinary years, providing strong support for the medium- to long-term price trends of commodities.

Climate disturbances drive market divergence: bullish themes are concentrated, while energy risks are being hedged.

The most direct trading opportunities in this super El Niño are concentrated in tropical agricultural products and some industrial metals, driven by rising expectations of supply contraction. On the climate front, the eastward shift of warm water is causing a corresponding shift in tropical rainfall, leading to a significant increase in hurricane activity in the Northeast Pacific. The number of named storms is currently 40% higher than the average for the same period, and Hawaii has already been hit by a strong hurricane, experiencing gales and flooding. Conversely, in core production areas such as Southeast Asia, South Africa, and Central America, persistent drought has become the norm. Referring to the super El Niño events of 1997 and 2015, severe droughts in Southeast Asia triggered massive wildfires in Indonesia, with over 500,000 acres burned this year. This not only damages the ecosystem but also directly impacts the growth of core tropical crops such as palm oil, natural rubber, cocoa, and coffee, resulting in reduced yields and lower quality. From a transactional perspective, Southeast Asia accounts for over 85% of global palm oil production. Drought directly leads to a decline in palm oil yields, and the effects of reduced production are delayed, often manifesting months or even the following year after an El Niño outbreak. Historically, palm oil prices have generally risen by over 40% during super El Niño cycles. Meanwhile, drought in major sugar-producing regions such as Brazil, India, and Thailand has increased expectations of reduced sugarcane production. This, coupled with torrential rains and floods in some South American mining areas, limited hydropower supply, and disruptions to the mining and transportation of industrial metals like copper and nickel, has further fueled the supply-side contraction, supporting the relatively strong prices of related commodities. At the same time, El Niño is expected to trigger a global food security crisis. The United Nations World Food Programme has warned that this climate phenomenon could lead to nearly 50 million new cases of severe hunger globally next year, with South Africa and Central America being the most severely affected. This further exacerbates the tight supply-demand balance in agricultural products, providing a medium- to long-term foundation for rising grain and oil prices.

Converse arbitrage opportunity: Atlantic hurricane cooling presents a hedging logic in the energy sector.

El Niño is not universally bullish for commodities. The market presents clear structural hedging and contrarian trading opportunities, most notably the significant decrease in North Atlantic hurricane activity. The upwelling of warm Pacific water creates westerly winds that propagate eastward into the tropical Atlantic, dramatically increasing vertical wind shear, forcefully tearing apart hurricane structures, and suppressing storm formation. On average, the North Atlantic produces more than three hurricanes during this period, but no hurricanes have formed so far this year. This reduction in hurricanes directly lowers the risk of disruption to oil and gas extraction, refining, and transportation in the Gulf of Mexico, improving energy supply stability and suppressing risk premiums for crude oil and refined products. This is the core climate logic behind the weak performance of the energy sector.

US Regional Climate Transmission: Seasonal Prices Priced in Advance

El Niño's atmospheric circulation disturbances will be transmitted to North America via the subtropical jet stream, fundamentally altering the autumn and winter climate patterns in the United States. The increased intensity and eastward shift of the jet stream will bring persistent rainfall and storms to the southern United States. During the peak winter precipitation period, flooding and coastal erosion in California, and severe convective weather along the Gulf Coast will become commonplace. In terms of trading, the rainy climate in the southern United States will benefit the growth of some domestic crops, but persistent flooding may cause waterlogging in fields and delay harvesting, potentially leading to temporary production reductions. Simultaneously, frequent extreme weather events will increase the weather premium for US agricultural products in the market, significantly amplifying the volatility risk of related commodities during the autumn and winter seasons.

Key trading strategy summary: Focus on established themes and avoid speculative trading.

Unlike short-term news-driven speculation, this super El Niño is characterized by its high intensity, long duration, and wide impact, making its market performance tradable in the medium to long term. The core trading logic is clear: High-certainty bullish themes: Tropical agricultural products such as palm oil, rubber, sugar, coffee, and cocoa, as well as water-dependent industrial metals like copper and nickel, and lithium carbonate, whose mining is affected by rainfall, have a solid supply contraction logic, strong market lag, and outstanding medium- to long-term allocation value; Hedging weaker sectors: North Atlantic hurricane cooling has led to a decline in the risk premium for crude oil and refined oil, making extreme price surges unlikely; Market rhythm: Energy stocks react fastest, agricultural products see a delayed but stronger impact, and metals are the last to materialize, allowing for segmented investment. Compared to unpredictable sudden disasters, the impact area, direction of disturbance, and timing of El Niño are highly predictable, allowing for advance positioning and phased profit-taking. Against the backdrop of this super cycle, the structural differentiation of commodities will continue, with commodities facing supply constraints expected to continue their independent upward trend.