Here are some of the more rational things to think about, from Barron's Commodities Corner:
Where El Niño Will Strike
Some commodities markets already are starting to shake from the potential for more extreme weather this year. What prices will rise?
Prices for commodities from sugar to nickel to palm oil are poised to rise as investors prepare for the possibility of more extreme weather this year.Commodity markets already have weathered record cold in the U.S. that sent natural-gas futures to five-year highs and severe drought in Brazil that has nearly doubled arabica-coffee prices. But now meteorologists are predicting even more abnormal weather, thanks to the return of El Niño.El Niño, a Spanish reference to the weather phenomenon's frequent occurrence around Christmas, is a rapid and prolonged warming of the tropical Pacific Ocean, which disrupts normal weather patterns and would exacerbate the extreme climatic events already affecting many markets this year. National meteorological agencies in India, the U.S., and Australia say there is a 60% to 70% chance of El Niño occurring by the end of 2014, and a more than 50% chance it will arrive earlier -- by this summer.It's a significant event in commodities markets because El Niño affects weather patterns virtually everywhere. Past occurrences brought dry weather to West Africa, damaging the region's cocoa crop, and wet weather to Brazil, delaying the coffee and sugar harvests. India typically sees less rain in its monsoon during an El Niño year, which can mean smaller grain and cotton crops.With markets like wheat, coffee, and beef already constrained by tight supplies, any further reductions caused by El Niño could send prices surging."Definitely the weather-risk premium is creeping back into commodity prices," says Desmond Cheung, manager of the agricultural-equities arm of BlackRock's $430 million Commodity Strategies fund.
The cocoa market already is en route to its second consecutive season of supply deficit, which has helped boost prices 5.7% this year. In seasons when it occurs, El Niño cuts global production by an average of 2.4%, according to researchers at the International Cocoa Organization....MORE
*Mt. Isa is home to Xstrata's Mt. Isa Mines, a really big operation that for a time in the 1980's was Australia's largest-stand alone business. It is now a division of Glencore who also watch the water level in Lake Moondarra. No water, no mining.
