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Hansen: Wild weather whipping up food price storm

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Every few years a warm pool of water develops across the eastern tropical Pacific Ocean. Known as El Nino it can create extreme weather patterns from flooding to droughts. This winter’s El Nino is already building and is predicted to be as strong as 1997’s. Food commodity prices are already affected. 

Saxo's Ole Hansen says it's creating dry conditions in Australia and South East Asia while causing excessive rain in Brazil. Sugar prices are up and palm oil too, due to dry conditions in Malaysia. But Hansen notes that oversupply in key crops over the last two years will help mitigate some of the problems from El Nino. 

Although higher food prices can be devastating for consumers, investors who have been long in commodities like sugar have benefitted. But Ole explains why the record longs could now lead to sellers coming back into the market as the commodity price begins to stabilise.

Ole also says investors should keep an eye on cocoa, coffee and even industrial metals which could also be impacted by this extreme weather.