CICC: Where is Super El Niño strong and where is it rising?

The Zhitong Finance App learned that CICC released a research report saying that NOAA anticipates that the strongest “super” El Niño incident since observations were recorded may take place. The bank discovered that strong and super-grade El Niño since 1960 is likely to reduce global corn and palm production, while soybean production may increase. Currently, the fundamentals of global supply and demand for agricultural products are already in the transition from easing to tight balance. Combined with restrictions on shipping in the Strait of Hormuz, are boosting oil prices, planting costs, and biofuel replacement demand. The export of food from the Black Sea is blocked, and supply, demand, geography, and weather are all catalyzing price strengthening.

CICC's main views are as follows:

This round of super strong El Niño: Warming up or reaching a record peak, the Pacific region floods east and west is droughted

El Niño is a natural phenomenon caused by abnormal warming of sea temperatures in the central and eastern equatorial Pacific Ocean: 1) Temperature precipitation: Global temperatures are high overall, precipitation is higher in America, and Southeast Asia is clearly arid. China's Yangtze River basin may be at risk of flooding next year. The relative temperature of the sea surface in the Pacific Ocean during the current El Niño peak may have reached a record high. The temperature in the past two months has reached the highest value in the same period in history since 1951. 2) Time of occurrence: The peak is mostly from November to January of the following year. NOAA predicts that the peak of this round may be October-December, and China's impact will be more significant in the summer of '27, when El Niño declines and ends. 3) Affected crops: Since peaks usually occur in winter in the northern hemisphere and summer in the southern hemisphere, production of staple food crops in the northern hemisphere is generally less affected. The growth period of corn, soybeans, etc. in South America is more affected by the coincidence with El Niño. Palms and rubber, which are perennial and concentrated in Southeast Asia, and cocoa in Africa are also affected.

Impact of historical agricultural products: There is a high probability that corn and palm production will decrease, and soybean production may increase

1) Corn: The 3 superstrong El Niños in history have all led to production cuts. Production cuts in the past were mainly caused by Brazil. Two of the three major incidents in history caused Brazil's corn area to drop by 17-18%. 2) Soybeans: In history, the production of superstrong El Niño has increased 2 times. The effects of El Niño's drought in northern Brazil and precipitation in southern Brazil are hedging their effects on soybean production, and historical production is more likely to be positive. 3) Palm: The 3 superstrong El Niños in history have all led to production cuts. Production areas are highly concentrated in Southeast Asia, and droughts have generally led to a decline in yield.

Agricultural product price prediction: Based on tightening supply and demand, extreme weather, high oil prices, and trade disturbances resonate to catalyze the rise in agricultural product prices

The bank estimates that for every 1ppt decrease in the global corn/soybean stock consumption ratio, the corresponding price increase is about 20% or 9%. At the corn level, the impact of the US drought boosted prices, and the impact of potential floods in South America determined the upper limit of price increases. At the soybean level, lower global production is expected to raise prices, and higher oil prices support biodiesel demand. Under a neutral assumption, the bank expects a 20%/10% increase in external CBOT corn/soybean prices in 3-6 months. The supply guarantee for wheat, rice, etc. in China is sufficient, and the trip is expected to be limited by extreme weather.

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