An analysis from CICC indicates that NOAA projects the formation of the strongest "super" El Nino event on record. The firm finds that since 1960, all major and super El Nino events have likely led to global corn and palm oil production declines, while soybean output may increase. Currently, global agricultural supply-demand fundamentals are transitioning from ample to tightening conditions. This shift coincides with Hormuz Strait shipping restrictions pushing up oil prices, higher planting costs, rising biofuel substitution demand, and disrupted Black Sea grain exports—together, supply-demand dynamics, geopolitical tensions, and weather patterns are driving price strength.

Core findings from CICC: This super El Nino could push warming to historic peaks, with eastern Pacific flooding and western drought. El Nino is a natural phenomenon triggered by anomalous warming in the central and eastern equatorial Pacific sea surface. Key impacts include: 1) Temperature and precipitation: global temperatures run higher, the Americas see more rainfall, Southeast Asia experiences notable drought, while China's Yangtze River basin may face flood risks the following year. The current El Nino's peak Pacific sea surface temperature could set an all-time high, with the past two months already reaching the highest levels for that period since 1951. 2) Timing: the peak typically occurs from November to January. NOAA predicts this event's peak may arrive in October-December, and China experiences more pronounced effects during the summer of the year when El Nino decays and concludes—historically in years ending with a 7. 3) Crop impacts: as the peak aligns with the Northern Hemisphere winter and Southern Hemisphere summer, production of major Northern Hemisphere staple crops is generally less affected. South American corn and soybeans, whose growing seasons overlap with El Nino, face greater impacts, as do perennial crops concentrated in Southeast Asia like palm oil and rubber, plus cocoa in Africa.

Historical agricultural impacts: corn and palm oil show higher probability of production declines, while soybeans may see output gains. 1) Corn: all three prior super El Nino events caused production declines, primarily driven by Brazil—two of these events reduced Brazilian corn acreage by 17-18%. 2) Soybeans: two of the three prior super El Nino events resulted in increased production, as drought in northern Brazil and rainfall in the south offset each other, making positive output outcomes more likely historically. 3) Palm oil: all three prior super El Nino events led to production declines, with drought generally reducing yields due to the crop's high concentration in Southeast Asia.

Price outlook: tightening supply-demand forms the foundation, with extreme weather, high oil prices, and trade disruptions jointly catalyzing price gains. CICC estimates that for every 1 percentage point decline in global corn and soybean stocks-to-use ratios, prices rise approximately 20% and 9% respectively. For corn, U.S. drought shocks support prices, while potential South American flooding determines the upside ceiling. For soybeans, downward revisions to global production expectations lift prices, with high oil prices boosting biodiesel demand providing additional support. Under a neutral scenario, CICC projects 3-6 month gains of 20% for CBOT corn and 10% for CBOT soybeans. China's wheat and rice supply security remains adequate, with limited impact expected from extreme weather.

Risk warnings: extreme weather risks, geopolitical risks, and trade friction risks.