According to such sources as The Weather Channel and CNBC, the world food supplies will be at the mercy of a Super El Nino as 2026 unfolds.
While this will likely be enough to continue triggering algorithms, the reality of supply and demand is far less dramatic.,
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A look at the forward curves for many of the markets mentioned show commercial interests are not concerned about supplies tightening in relation to demand over the coming years.
A CNBC.com piece with the teaser, “From war to weather: A ‘super El Nino’ event poses fresh risks to global food costs”, is making the rounds Thursday. There is much to unpack here, starting with the casual drop of the ever-popular topic of the US president’s War on Iran. (It should be noted CNBC promoted another piece stating, “(The US president) says U.S. read to ‘next conquest’…”, sending bettors to any number of predictive sites to make money on what country is next on the list after Venezuela and Iran. I believe the early favorite is the powerhouse Greenland.) But for this piece, let’s focus on the phrase “Super El Nino”.
I didn’t have to look it up but did anyway to confirm my Blink reaction this term was coined by The Weather Channel. What a shock. The first thing I thought of when I saw the piece was a classic clip from the long-running adult animated program South Park. One of the meanest characters ever drawn, Stephen Stotch, once told his naïve son Butters, “There’s no reason to be afraid of things that aren’t real; there’s plenty of real things to be scared of. Like Super AIDS.”
What makes an El Nino a Super El Nino? I don’t know, you’d have to ask the fine folks at The Weather Channel who also brought us such classics as “bomb cyclone”, “death ridge”, “weather whiplash”, and “super outbreak” to describe an oceanic storm, high pressure ridge, changing weather, and a storm front. Yeah, pardon me if I hold off on installing a shelter to protect me from the onslaught of this summer’s Super El Nino.
But as I’ve talked about frequently over the past 10 years, reality doesn’t matter. If the phrase is plugged into trading algorithms and classified as bullish, then all it takes is for properly written headlines to trigger those same algorithms to behave a certain way. Given all the manipulation going on these days, it’s laughable to think back to when WGN’s famed weatherman Tom Skilling was questioned extensively on if he had positions in Grains back in the day of his must-see television midday weather forecasts.
I don’t know what constitutes Super, but a run of the mill El Nino means “warmer winters in the northern US and Canada and wetter conditions in the southern US”. The CNBC piece went on to ring the alarm bell of food security, mentioning cocoa, oilseeds, rice, and sugar.
While reality takes a back seat to headlines when it comes to driving Watson these days, let’s look at what some of these markets are showing us regarding long-term real supply and demand.
Cocoa: The market’s forward curve is in contango (carry) from the May 2026 issue (CCK26) through at least the March 2028 contract. This tells us the commercial side of the market, those involved with the underlying cash commodity, are not concerned about supply and demand. Sugar: It’s a similar situation, with the forward curve in contango through the March 2027 contract. The May and July 2027 issues are flat, before higher prices are registered out through March 2028. Again, commercial interests aren’t worried about the Super Little Boy (El Nino) at this time. Soybean Oil: Here’s where things start to get interesting. The market’s forward curve is in backwardation (inverted) from May 2026 (ZLK26) through at least July 2029 indicating the commercial side of the market is long-term bullish. Is this due to a lack of soybeans to make the bean oil necessary to meet demand? Probably not. A better case could be made for bean oil is expected to see a demand market develop, meaning new demand to offset steady to growing supplies. Keep in mind all the recent hoo-hah surrounding US renewable diesel for the coming years. Bean oil’s forward curve indicates there may be a sliver of truth to the chatter this time around. Soybean Meal: This is the one that catches my eye. If the US is going to crush all those soybeans to meet demand for soybean oil, then supplies of the byproduct soybean meal should grow to cumbersome levels. Particularly with the US cattle herd not expanding in the foreseeable future. If all this is true, bean meal’s forward curve should show a strong contango. But it doesn’t. In fact, the curve has flipped from a weak contango to solid backwardation since early February, the timing indicating Argentina’s crop may not be as big as advertised. Why does this matter? Argentina has historically been the world’s largest soybean meal exporter.Could there be an El Nino this year? Of course. What does it mean? Over the past 40 years I’ve heard it blamed for poor global grain production and record yields, telling me there is more to the equation than a simple phrase. But again, the only thing that matters is if Watson is triggered into buying, or selling, on the headlines. If supply and demand situations actually start to change, we will know by watching futures spreads rather than sensationalized bits of “news”.
On the date of publication, Darin Newsom did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.