【TMGM Financial Recap】The Strongest El Niño In History Approaches, And The Main Theme Of Global Inflation Trading Needs To Be Clarified

A 75% probability means that the 2026/2027 El Niño cycle will not only join the "super El Niño" club, which has only occurred four times since 1950, but may also break the historical records of 1982/1983 (+2.4°C), 1997/1998, and 2015/2016 (all about +2.3°C), making it the strongest on record.

Another key change is the "structural northward shift of the main rain belt." Under traditional El Niño conditions, China has shown a pattern of "floods in the south and drought in the north," but Li Chao, chief economist at Zheshang Securities, pointed out that against the backdrop of global warming, the main rain belt may structurally shift northward, increasing flood risks in northern staple grain-producing regions and possibly facing summer droughts in southern hydropower regions. This means that the direction of domestic agricultural product supply disturbances and the power supply-demand pattern may deviate from historical experience.

Meanwhile, the abnormal sea temperatures in the Pacific have already been transmitted to agricultural futures, non-ferrous metal prices, and electricity sector stock prices. The transmission chain of this main trading thread needs to be broken down layer by layer from climate signals.

Agricultural Products: Supply-Side Risks Have Shifted From Expectations To Being Realized

Agricultural products are the most direct and resilient varieties in El Niño transactions. The United Nations Food and Agriculture Organization has revised down its forecast for global rice production for 2026/27 to 553.1 million tons, a decrease of 1.9% from the previous year, clearly attributing this to severe weather related to El Niño. The World Bank's warning is even more severe: if El Niño continues until 2027, rice production in affected regions could drop by 20% to 50%, with South Asia, Southern Africa, and East Asia being the hardest-hit regions.

The futures market has already reacted. Since July, CBOT soybeans have risen more than 14%, CBOT corn by more than 23%, and CBOT wheat by more than 21%.

In its cross-asset research report released in August, Morgan Stanley clearly stated that white sugar is the agricultural product most likely to see price boosts due to El Niño—climate conditions threaten sugarcane production in both Asia and Brazil. Guojin Futures' analysis further lists palm oil, white sugar, and natural rubber as the three most resilient varieties.

From the second half of 2026 to the second half of 2027, it is clear that bulk agricultural products dominated by natural rubber, palm oil, and white sugar are bullish. Based on historical experience, natural rubber prices are expected to rise by more than 60%. China Merchants Securities' review shows that in three historical El Niño events, natural rubber saw the largest increase of about 238%, white sugar about 152% and 61%, and palm oil about 54.7%.

However, there is a key delay that requires attention. China Merchants Securities points out that tropical crops have a physiological lag of 6 to 13 months, and supply pressures from reduced yields often lag 9 to 12 months before they fully manifest. This means the price elasticity of palm oil and white sugar is more likely to be realized in the first half of 2027.

Non-Ferrous Metals: Mine Supply Disturbances Are "Amplifiers" Rather Than "Decisive Factors"

Industrial metals are affected by different pathways from agricultural products. El Niño does not directly disrupt mine production, but indirectly disrupts supply through secondary disasters such as heavy rain and flooding. El Niño causes flooding in South American regions such as Brazil, Peru, and Chile, which are precisely the world's major mineral production areas. From the perspective of metal products, El Niño causes significant disruption to the production of copper, nickel, and silver.

Copper supply risks are the most prominent. If South American mining areas face continuous heavy rain and flooding, mining and logistics outbound will be simultaneously hindered, disrupting copper concentrate supply. Global copper mine discoveries have plummeted from 705 million tons in 1990–1999 to 163 million tons in 2010–2019, a decrease of 76.9%; Between 2020 and 2024, only six new copper mining projects were added globally, with cumulative new copper resources at just 8.8 million tons. Global copper supply is already in a long-term structural weakening phase, and El Niño weather disturbances act more like an "amplifier of supply-demand contradictions."

Nickel supply disruptions have already materialized. Due to droughts triggered by El Niño, Indonesia's largest nickel industrial park, the Morowali Industrial Park, may be forced to cut production by 30% to 40% due to water supply restrictions at smelters. Indonesia's nickel output accounts for more than half of the global total, and the scale of this reduction has a significant impact on global nickel supply.

However, Galaxy Securities gave a relatively restrained assessment in its September 15 research report: El Niño is mostly a localized short-term disturbance for non-ferrous metals, more like an amplifier of supply-demand contradictions, rather than a decisive factor in the market. The core driving force for industrial metals still comes from AI computing power, grid upgrades, and real incremental demand from the new energy industry.

Inflation Transmission: An Underestimated Macro Main Thread

The most profound impact of El Niño on capital markets may not lie in commodity prices themselves, but in the transmission of El Niño to inflation through food prices. A team led by Nora Sentivai, JPMorgan's Senior Global Economist in London, predicts in the report that turmoil in the Strait of Hormuz and a potential "super El Niño" phenomenon could push up fertilizer and food prices, with global food inflation rising from 2.8% in the first half of 2026 to 5% in the first half of 2027.

Goldman Sachs' estimate is more specific: if El Niño causes a 1.65°C rise in temperature, global food prices could cumulatively increase by 15.8% by 2028; If combined with the Iranian war pushing up oil prices, it could trigger new market shocks.

This inflation transmission chain has a direct impact on monetary policy. Reuters reported that many emerging market central banks believed there was room for rate cuts at the start of the year, but now "we see central banks stopping cuts, and some are raising rates." Central banks in India, Indonesia, the Philippines, South Korea, Pakistan, and Sri Lanka have raised rates at least once this year. Our judgment is: "El Niño will only make inflation more stubborn."