Wild weather swings from the phenomenon known as El Nino have rocked commodities and countries from Australia to Paraguay. Now, analysts are tipping renewed jitters spurred by La Nina, El Nino's little sister.
While El Nino is characterized by rising sea surface temperatures in the Pacific Ocean, La Nina represents periods of below-average temperatures, which produces an opposite weather impact. So while El Nino saw record heat in Australia and warm climate in North America during December, La Nina is expected to bring rains Down Under and intensified chills in North America during the same period.
"Our analysis above suggests an 89 percent likelihood of a La Nina event occurring an average of twelve months after the end of an El Nino, but may also develop as soon as three months afterwards," Societe Generale (SocGen) said in a recent note.
The latter scenario occurred back in 1997-1998 following a record El Nino, the bank added.
The fact that this year's El Nino is being called the most powerful ever could see history repeat itself. If that happens, La Nina could hit before Christmas based on U.S. government forecasts for the current El Nino cycle to fade by May-July.
As a result of El Nino, natural gas has weakened while cocoa and sugar prices have spiked amid warmer-than-expected Northern Hemisphere winters, a drought in West Africa and excessive rains in Brazil.
But with La Nina, grains are vulnerable with bad weather set to diminish output and boost prices.
"Dry weather conditions in the U.S. can threaten the development of corn, soybeans and wheat crops, while dry conditions in Argentina and southern Brazil can impact corn and soybeans," SocGen said.
Emerging La Nina weather extremities presents a bullish case for agricultural products across Asia including sugar, palm oil, and rice, echoed OCBC economists in a note.
Seeing as North American winters are expected to be stronger with La Nina, SocGen recommends investing in natural gas.
Heavy rains in Australia at the same time could also impact the thermal and coking coal markets due to mine flooding, which happened during the La Nina event of 2010-11.
"This could occur again, but in the current environment, increased rainfall in Australia will also likely have an impact on the restocking of cattle and sheep herds," SocGen said.