The S&P GSCI Agriculture Index broke out to a new three-year high this week, completing a lengthy basing process. While three-year highs are not inherently significant, this breakout deserves a closer look because it is occurring alongside a rapidly strengthening El Niño.
NOAA’s latest data show sea-surface temperatures in the eastern equatorial Pacific have risen sharply, with a greater than 90% chance of a very strong El Niño during the Northern Hemisphere fall and winter. NOAA also estimates a 69% chance that the October–December event could rank among the strongest on record.
With agricultural prices rising, could an intensifying El Niño provide additional fuel for the advance?
During El Niño periods, the S&P GSCI Agriculture Index has advanced in 66% of cases, with an average gain of 6.9%. Interestingly, through the first 58 sessions, the current El Niño is tracking well ahead of the historical tendency.
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