The unusually heavy rain coincided with a period of reshuffling in the financial markets.

Author: Jia Liu, Zhang Sheng Beatz

Tianjin has been hit by sudden downpours for several days. It was sunny before I left home, but I was soaked halfway there. My friend's flight to Shenzhen was canceled due to the typhoon, and all high-speed rail tickets to Zhejiang were suspended.

Checking the news on my phone, I saw that Fushun, Liaoning, received over 329 millimeters of rain in just a few hours. Residents in Fangchenggang, Guangxi, said it was the worst flood in 20 years, and seven national meteorological stations broke historical records for single-day rainfall. The largest-ever high-temperature warning was issued in North China, with local surface temperatures approaching 50°C. In the first week of July, two to three typhoons formed simultaneously in the western Pacific, with Super Typhoon Bavi approaching the southeast coast.

After the start of summer in 2026, the weather in China has clearly become more unpredictable.

It's not just us who are restless. The waters off the coast of Peru remain warmer than usual, limiting anchovy fishing and causing fishmeal prices to rise by about 80% over the past year. Southeast Asia is showing signs of increased drought as the dry season begins, putting pressure on oil palm producing regions in Malaysia and Indonesia. The Indian monsoon rainfall window hasn't reached its critical point yet, but the market is already betting on a weaker trend. Analysts have marked Australian wheat planting areas as potentially shrinking significantly.

These extreme weather changes are scattered across different continents and seem unrelated. But in fact, besides direct triggering mechanisms such as monsoon moisture, the outer circulation of tropical storms, location, and topography, they are all highly likely influenced by the same storm:

ENSO, El Niño.

ENSO, El Niño.

El Niño, the Pacific is running a fever. ENSO, or El Niño-Southern Oscillation, is the largest interannual signal in Earth's climate system. Simply put, it describes the periodic changes in sea surface temperature and atmospheric circulation in the Pacific Ocean. Under normal circumstances, the eastern part of the equatorial Pacific is cooler than the western part, and the trade winds push warm water towards the western Pacific. However, if the trade winds weaken, the warm water flows eastward, causing an abnormal rise in sea surface temperature in the central and eastern Pacific—this is El Niño. Meteorological agencies determine whether El Niño will occur primarily by looking at a key area: the Niño 3.4 area (a key area in the central equatorial Pacific, which can be understood as a "thermometer" for judging the strength of El Niño). If a region experiences temperatures more than 0.5°C above normal for several consecutive months, it is considered to be in an El Niño state; if the temperature exceeds 2°C, it is classified as a super El Niño. 1997 and 2015 were two typical examples of super El Niño events. This year's El Niño may be the strongest since 1950. On June 11, the U.S. National Oceanic and Atmospheric Administration (NOAA) officially issued an El Niño warning, confirming that El Niño conditions have emerged and predicting that it will strengthen until the end of 2026 or the beginning of 2027. They believe there is a 63% probability of a super El Niño occurring between November this year and January next year. The Institute of Atmospheric Physics of the Chinese Academy of Sciences is slightly more conservative in its assessment, giving a greater than 70% probability of a moderate El Niño and about a 10% probability of a super El Niño.

Meteorologist Ben Noll posted a Pacific sea surface temperature map on X, titled "The Pacific is Feverish." The map shows deep orange and red covering most of the Pacific, indicating that the area covered by this oceanic heatwave is more than eight times the size of the continental United States.

For us, its impact is not "directly creating a particular rainstorm," but rather changing the underlying patterns of atmospheric circulation. It affects the position of the subtropical high in the western Pacific, alters the path of moisture transported by the East Asian summer monsoon, makes rainbands more likely to deviate from their normal positions, and increases the risk of high temperatures, drought, and severe convection.

Adding to this is global warming; for every 1°C increase in atmospheric temperature, the amount of water vapor it can hold increases by approximately 7%. Therefore, today's El Niño is not occurring within normal climate conditions, but rather against a backdrop that is already hotter, wetter, and more prone to extremes. While monsoons and typhoons are occurring here, the financial markets are already sensing something amiss, with some funds stirring. On June 24th, Bloomberg reported that hedge fund Moreton Capital Partners was raising $500 million for a dedicated instrument. The target of the transaction is crops such as South African corn, Malaysian palm oil, and Australian wheat, which are affected by El Niño. Co-founder Les Finemore's reasoning was simple: the market has significantly underestimated the risks posed by this year's El Niño. Weather is no longer just background noise in commodity portfolios; to some extent, it can be a standalone subject for separate fundraising. How did Finemore manage to raise $500 million? Because making money from extreme weather events like El Niño isn't just a theory; people have made fortunes from it for decades. The founder of the "Turtle Trading" method made his first fortune. In 1972, anchovies suddenly disappeared off the coast of Peru. These small fish, only a few centimeters long, are something most people in the world will never eat in their lifetime, but when ground into fishmeal, they are one of the most important sources of protein in animal feed worldwide. The anchovies disappeared because the waters of the equatorial Pacific suddenly warmed, cold water stopped rising, and the planktonic food chain broke. Meteorologists later named this phenomenon: El Niño. With fishmeal running out, feed suppliers had to find substitutes, driving up soybean meal prices, which in turn pushed up soybean prices. At the Chicago Mercantile Exchange, a young trader named Richard Dennis, not yet 26, saw prices constantly hitting new highs and kept buying soybeans. In 1974, he made approximately $500,000 on soybeans, becoming a millionaire by the end of the year.

Richard Dennis in his youth

This young trader, Richard Dennis, who earned his first fortune, later became the founder of the famous "Turtle Traders," and his name became one of the founders of the trend trading school.

Another typical story comes from Anthony Ward, nicknamed Chocfinger. He founded Armajaro in London in 1998, specializing in cocoa and coffee.

What makes this company unique isn't its trading desk, but its meteorological department: it built its own network of weather stations, hired full-time meteorologists, and established a research team of over 20 people in West African producing regions. Their logic is that small changes in weather can cause crop yields to fluctuate by 10%, and whoever knows the weather first knows the price first. In 2002, they acquired three-quarters of the London Stock Exchange's monthly cocoa deliveries, earning a pre-tax profit of £10.4 million. On July 17, 2010, they received 240,100 tons of physical cocoa, worth £658 million, representing 7% of global annual production—essentially all of Europe's available inventory at the time. Cocoa prices were pushed to their highest level since 1977. Let's look at some examples from recent years. By 2024, cocoa will be the world's most sought-after commodity. Côte d'Ivoire and Ghana in West Africa, home to 70% of the world's cocoa production, experienced unusually high temperatures and the harsh Hamadan winds (hot, dry winds blowing from the Sahara to the West African coast). This caused widespread pod rot, compounded by disease, old trees, and low inventory, leading to a more than 400% surge in cocoa futures prices over two years, briefly exceeding $10,000 per ton. Those who profited most from this surge weren't just in the cocoa industry; a group of quantitative trend funds also benefited. Razvan Remsing of Aspect Capital described it as their best first quarter in 25 years. AQR's managed futures strategy rose approximately 17.4% in the first quarter. Capital Fund Management's trend fund rose approximately 17.5%. Aspect's flagship fund rose 21.4% by late April. Winton, founded by David Harding, saw its diversified macro fund rise approximately 13% in the first quarter. During the same period, besides making a lot of money on cocoa, Winton also made a fortune in another area: El Niño typically brings warmer winters to parts of the United States. Less cold winters mean weaker demand for heating gas, leading to stockpiling and the Henry Hub (equivalent to Brent crude) natural gas benchmark price falling to near 30-year lows. Buying the dip in cocoa or sugar? Back to 2026. This El Niño cycle hasn't peaked yet, but the market has already moved ahead. Palm oil futures surged from 9400 yuan to 9993 yuan in late April before falling back. Rubber started from its April lows and briefly broke through 18300 yuan in mid-May. Sugar prices fluctuated between 5200 and 5450 yuan. Peanuts, supported by drought and cost factors, saw seven consecutive days of gains. The strange thing is that the fundamentals of these commodities don't support price increases. Malaysian palm oil inventories were still increasing month-on-month at the end of May, while domestic sugar inventories were 1.83 million tons higher year-on-year, and domestic palm oil inventories were 25.68% higher year-on-year. Prices rose before production even started to decline. The only reason for the rise is the anticipated production reduction brought about by El Niño in 6 to 12 months. Over the past fifty years, every moderate to strong El Niño event has left its mark on the commodity market. Palm oil prices rose 169% in 1982. Indonesian rubber production decreased by 11.3% from 2009 to 2010, yet spot prices rose 157.79% in two years. Sugar prices rose 65% from 2015 to 2016. In Southeast Asia, it brings drought, suppressing palm oil and rubber production. In India, it weakens the monsoon, affecting sugar and cotton. In Peru, it causes anchovies to disappear, driving up fishmeal prices. But on the other side of South America, it brings more rain, potentially improving soybeans and sugarcane in Brazil and Argentina. In mining areas of Chile and Peru, heavy rainfall impacts copper mines rather than farmland. In the United States, a warm winter suppresses natural gas demand. Discussions about this El Niño phenomenon continue to develop in overseas communities. A post by commodities blogger @tleilax__ included two forecast charts. One chart shows how much higher global temperatures will be compared to the same period in previous years from July to September. The chart is almost entirely red, which coincides with the crucial growing season for grains, oilseeds, Asian rice, and sugar. The other chart shows whether rainfall will be higher or lower than the same period in previous years. The chart shows widespread dryness in India and Southeast Asia, which corresponds to the market's biggest concern: a weaker monsoon. Therefore, his conclusion is that India and Southeast Asia may experience the weakest monsoon rainfall in decades, occurring against the backdrop of a global fertilizer shortage. This post has currently received over 1.08 million views. Substack's commodities column lists palm oil, cotton, and cocoa as the cluster with the clearest risk-reward profile over the next 6 to 12 months. The Singaporean investment community is meticulously examining Malaysian plantation stocks, concluding that pure upstream growers have captured all the volatility, while companies like Wilmar International, primarily focused on mid-to-downstream processing, have had their profits squeezed by rising palm oil prices. The US stock community is circulating a more convoluted argument: Adecoagro, an agricultural company in Brazil and Argentina, is a "weather hedge in a tech-heavy portfolio," because El Niño brings rain, not drought, to South America, and its production expands while Asian production cuts drive up prices. The script for this market rally is still largely untold, so buying in earlier isn't necessarily better. There aren't many hard indicators that can change the direction of your position, but each one is crucial: Whether the Niño 3.4 index breaks through 2.0℃ in autumn and winter is the dividing line between moderate and extremely strong volatility, and also the switch for an overall increase in agricultural commodity volatility. Rainfall data from the Indian monsoon from June to September is the directional indicator for sugar, cotton, and rice. The Malaysian Palm Oil Board's monthly inventory report; the speed at which high inventories are digested determines when anticipated market movements will connect with actual market movements. Rainfall in Guangxi in July and the number of consecutive days of high temperatures in North China; the former affects sugar, the latter electricity. The subsequent fundraising scale of weather-specific funds like Moreton, and the amount of institutional funds involved, will determine whether weather trading is a short-lived surge or a main theme for the entire year. The experiences of 1972 and 2024 point to the same time lag: the real price effect of El Niño mostly occurs after the event peak. Dennis only made money two years after the anchovy crash, and Coco only truly exploded after ENSO turned neutral. In the second half of 2026, the market traded on expectations; in 2027, it traded on the production cuts themselves. Initially, nobody cared about this storm. Beyond these trading opportunities, what's more thought-provoking are two posts by financial blogger @FinanceLancelot on X that garnered numerous reposts.

One ​​article says that NOAA (National Oceanic and Atmospheric Administration, one of the most frequently cited climate monitoring agencies globally) is predicting a "super El Niño" unlike anything seen since 1878, implying warming, widespread drought, crop failures, and the risk of famine over the next two to three years, accompanied by a Sky News video titled "11% of the Global Population."

Another article presents a similar view: global seaborne energy supplies have decreased by 60% in the past 60 days, accompanied by a shipping oil flow chart showing a precipitous drop from the highs at the beginning of the year.

His conclusion was that fertilizer shortages combined with El Niño could lead to global food shortages within 3 to 4 months. These posts, however, are clearly doomsday-like in their wording and shouldn't be taken at face value. But they reflect one thing: a group of people in the market are weaving El Niño, energy supply disruptions, fertilizer shortages, and tensions in the Strait of Hormuz into a narrative, and this narrative is gaining traffic and attention. More importantly, this narrative points not only to profits and losses in futures accounts but also to potential impacts on all ordinary people, adding to everyone's cost of living. Initially, no one paid attention to this storm. It was just a typhoon, a downpour, a slight rise in sea temperature. But the storm won't stop just because no one cares. Heavy rains around the world, canceled flights, the disappearance of anchovies in Peru, rotting cocoa pods in Ghana, and sugar shortages—these are all part of the storm, and will ultimately affect the lives of different people.