Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

El Nino causing fluctuations in commodity prices


Some are seeing the El Nino that is brewing the pacific ocean as an opportunity to make money on the commodity markets it seems (according to this article in the Telegraph newspaper). The El Nino phenomenon causes fluctuations in weather patterns across the southern hemisphere such as delays to the Indian monsoon and increased dryness and risk of wildfires in south east Asia. These changes in weather patterns in turn cause price fluctuations across commodity markets.

It’s not just the commodity markets that fluctuate though; supply chains can be disrupted or become less profitable due to lack of crops to supply or difficulty to deliver and impacts on businesses globally can be huge through the knock on effects that will no doubt occur.

Some might profit through clever playing of the markets but the majority will suffer financial losses which have the potential to be huge. Weather risk management is the best protection for changes in weather patterns and while El Nino does not occur every year it is worth considering as part of your weather risk management program. Hedging the effects of the weather will help to smooth your bottom line and help you get through these kind of weather events more securely.

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