Key Takeaways:
Barclays projects palm oil, coconut oil and rubber could climb 30 to 40 percent within 18 months as a record El Niño disrupts global supply.
"Rising confidence in a historic El Niño increases the likelihood of significant disruptions across agricultural, energy and industrial commodity markets," Craig Rye, sustainable investing research analyst at Barclays, said in a note Friday.
Rye cited multi-model forecasts from the International Research Institute for Climate and Society showing the El Niño index could peak near 3.2 degrees Celsius between late 2026 and early 2027 — roughly 15 percent stronger than the 2015-16 Super El Niño. Robusta coffee may rise 20 to 30 percent, rice 10 to 20 percent, while aluminum and copper could gain up to 20 percent and thermal coal 20 to 40 percent over the same horizon.
The forecast lands as the Quantix Commodity Index Total Return — tracking 24 dollar-denominated futures across energy, agriculture, livestock, industrial metals and precious metals — has surged 22.5 percent since late June to a record high. LME copper has posted nine consecutive weekly gains into the $14,200-$14,500 per tonne range, with Chile flood outages and Papua New Guinea drought already disrupting mine-to-port logistics.
Rye identified weather-sensitive agricultural commodities as the highest near-term risk. Palm oil, coconut oil and rubber — concentrated in Southeast Asia — face drought and abnormal rainfall patterns that could push prices up 30 to 40 percent. Robusta coffee, primarily grown in Vietnam and other Southeast Asian nations, may advance 20 to 30 percent. Rice prices could rise 10 to 20 percent as drought threatens crops and water supplies across Southeast Asia and parts of Central America.
The event would be about 15 percent stronger than the 2015-16 Super El Niño, which was the strongest on record. Historical El Niño events have been associated with widespread drought, flooding and extreme temperatures across major agricultural producing regions.
Rye warned the agricultural disruption would transmit into industrial commodities. Aluminum and copper could gain as much as 20 percent over 18 months, while thermal coal may surge 20 to 40 percent. The transmission path: drought cuts hydropower generation, raising electricity demand and prices, which increases aluminum smelting costs. Meanwhile, extreme weather directly disrupts mine operations and port logistics, constraining copper supply.
Physical markets are already showing signs of tightness. Chile flood outages have halted some copper mine operations, and drought in Papua New Guinea has starved the Ok Tedi river shipping route. LME copper has risen for nine consecutive weeks into record territory around $14,200-$14,500 per tonne. Zinc hit a four-year high as LME inventories fell roughly 65 percent year-to-date, and wheat futures reached a three-year high near $7.60-$7.83 per bushel as Black Sea export disruptions compounded.
Rye identified Bunge and Archer-Daniels-Midland as potential agricultural beneficiaries. Norsk Hydro, South32 and Rio Tinto could benefit from higher aluminum prices, while Freeport-McMoRan, Hudbay Minerals, First Quantum Minerals and Southern Copper offer exposure to the bank's bullish copper scenario.
The Barclays warning is not isolated. UBS this week urged clients to "position for a commodity upcycle," and veteran commodities strategist Jeff Currie said "the illusion of abundance is likely behind us." Years of underinvestment, declining inventories, adverse weather and China's restrictions on critical-material exports are converging into what analysts describe as an emerging supply shock.
This article is for informational purposes only and does not constitute investment advice.
