SEOUL, KOREA - As the likelihood of an El Nino in the coming summer and autumn increases, more and more stock analysts recommend primary goods futures and agriculture stocks. It may be that the predictions of Jim Rogers, the founder of the Quantum Fund, there would be a day when farmers are driving on Lamborghinis would come true. According to the U.S. National Oceanic and Atmospheric Administration, the probability of an El Nino occurring in the summer is as high as 70 percent.
SK Securities said on June 18 in a research report, "Once the possibility indeed materializes, stock investors must be prepared to look into stocks related to food production, processing, and distribution." Once agricultural output declines due to drought and flood, the report said, the demand for fertilizer and farm equipment would rise as farmers need to produce more the following years.
El Nino is defined by prolonged warming in the Pacific Ocean sea surface temperatures when compared with the average value. The accepted definition is a warming of at least 0.5 degree Celsius averaged over the east-central tropical Pacific Ocean. Typically, the anomaly occurs at irregular intervals of two to seven years and lasts nine months to two years.
Lee Seung-wook, SK Securities analyst, said, "Given previous episodes of El Nino, they usually accompanied drought, flood, and wildfire. The episodes affected major grain-producing regions of Southeast Asia, North America, and South America, causing disruptions in food production. Especially in Southeast Asia, El Nino may affect the output of cocoa, palm oil, natural rubber, and coffee. In the Americas, it may increase the variability of wheat, soybean, and corn production.
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