El Niño’s ‘sweet tooth’ means indulgent treats could soon be even more expensive

A
mammoth
rally
in
2023
for

El
Niño-exposed
raw
materials
will
likely
hit
consumers’
pockets
over
the
coming
months,
according
to
one
specialist
food
and
agribusiness
bank.

Soft
commodities
have
posted

huge
gains
year-to-date.

Futures
contracts
on


orange
juice,


cocoa,
coffee
and


sugar
have
soared
in
part
because
of
extreme
weather
and
supply
concerns
related
to
El
Niño.

“You
can
say
El
Niño
has
a
sweet
tooth
because
it
sort
of
eats
or
takes
away
much
of
the
sugar
in
the
world,”
Carlos
Mera,
head
of
agri
commodities
market
research
at
Netherlands-based
Rabobank,
told
CNBC.

“Sugar
prices
have
probably
already
been
passed
on
[to
consumers]
but
certainly
for
chocolate
we
should
expect
a
big
increase
at
retail
level
—
and
El
Niño
is
certainly
something
to
watch.”

The
El
Niño
phenomenon,
which
returned
earlier
this
year,
is
a
naturally
occurring
climate
pattern
that
takes
place
when
sea
temperatures
in
the
eastern
Pacific
rise
0.5
degrees
Celsius
above
the
long-term
average.
It
can

pave
the
way
to
more
storms
and
droughts.

The
effects
of
El
Niño
tend
to
peak
during
December,
but
the
impact
typically
takes
time
to
spread
across
the
globe.
This
lagged
effect
is
why
forecasters
believe
2024
could
be
the
first
year
that
humanity
surpasses
a

critical
warming
threshold.

El
Niño-related
dryness
in
much
of
Southeast
Asia,
India,
Australia
and
parts
of
Africa
has
supported
a
price
rally
for
soft
commodities
such
as
sugar,
coffee
and
cocoa
this
year,
Rabobank

said
in
its
annual
outlook
for
2024.

The
Dutch
bank
broadly
expects
global
food
price
inflation
to
fall
sharply
after
years
of
soaring
prices.

It
also
warned
that
several
crops
could
be
adversely
affected
by
El
Niño
early
next
year,
while
acknowledging
there
is
the
potential
for
some
crops
to
benefit,
citing
those
in
the
United
States,
southern
Brazil
and
Argentina.

Orange
juice
futures

climbed
a
whopping
80%
in
2023,
hitting
an
all-time
high
in
late
November
after
hurricanes
and
disease
devastated
citrus
crops
in
Florida.

“Occasionally,
these
markets
exceed
our
wildest
expectations.
Did
anyone
predict
$4.00
orange
juice?
The
profit
potential
from
this
trade
is
staggering,”
trader
Dave
Reiter
of
Reiter
Capital
Investments
LLC

said
on
Oct.
30
via
X,
formerly
known
as
Twitter.

Reiter
has
since
warned
that
the
eventual
crash
in
the
price
of
orange
juice
“will
be
one
for
the
record
books.”

The
price
of
cocoa,
a
vital
ingredient
for
chocolate,

jumped
64%
this
year
to
notch
46-year
highs
as
West
African
supplies
were
hit
hard
by
heavy
rains
and
amid
issues
such
as
fungal
disease.

The
robusta
coffee
variety
on
Dec.
15
hit
its
highest
level
in
15
years,
while

sugar
prices
have
risen
13%
in
2023
even
after
paring
gains
since
registering
a
12-year
peak
in
September.

Rabobank’s
Mera
said
there
is
a
“very
clear”
relationship
between
El
Niño
and
higher
sugar
prices
because
the
weather
pattern
tends
to
make
conditions
in
major
sugar
exporting
countries
such
as
Thailand,
India
and
Australia
drier
than
normal.

For
cocoa,
Mera
said
the
impact
of
El
Niño
is
likely
to
be
“much
weaker.”
He
added
that
the
mechanics
of
the
cocoa
market
means
higher
chocolate
prices
are
not
likely
to
immediately
weaken
demand
or
even
incentivize
production.

“The
cocoa
industry
is
characterized
by
a
lot
of
forward
selling
in
part
because
of
how
cocoa
is
traded
[in
the
Ivory
Coast
and
Ghana],”
Mera
said,
referring
to
the
world’s
two
largest
cocoa
producers.

“For
example,
they
tend
to
sell
the
crop
a
year
in
advance.
That
means
that
the
chocolate
that
you
buy
in
the
supermarket
has
probably
been
bought
at
a
much
lower
price
a
year
ago,”
he
added.

“I’m
surprised
that
cocoa
is
so
much
higher
and
that
is
not
felt
by
the
consumers
just
yet,”
Mera
said.
“It
will
be
—
that
cost
will
be
passed
to
consumers
at
some
point
in
2024.”