El Niño Food Shock
whatupwilly@whatupwilly
−1.4%
since Oct 2
The idea
I think this El Niño cycle will hit food production much harder than markets expect, with crop failures across Asia and Australia driving prices higher. I'm playing it three ways: owning crop prices directly through commodity funds, owning the fertilizer and seed companies farmers lean on when yields drop, and owning the grain traders and producers positioned to profit when harvests fail elsewhere. I'm keeping 10% in cash to add as harvest damage reports come in and confirm the thesis, and I'd rethink this if the drought and yield data start coming in milder than expected.
What it owns
- Suppliers of inputs that farmers increase spending on when yields drop, to recover lost production in replanting seasons. · NutrienThe world's largest fertilizer seller benefits when crop failures force farmers to increase nutrient spending per acre to recover lost yields., MosaicPotash and phosphate demand increases when high crop prices make it economical for farmers to spend more on nutrients to maximize remaining yields., CF IndustriesNitrogen demand rises during replanting waves as farmers replace failed crops and increase application rates when grain prices justify the input cost., CortevaSells drought-tolerant seeds that farmers prioritize after seasons of poor harvests, particularly for replanting cycles following failed crops., ICL GroupA lower-cost exposure to potash alongside Mosaic, benefiting from increased nutrient demand when crop failures raise the value of recovery investments., FMC CorporationStressed crops weakened by drought face heavier pest pressure, and El Niño weather patterns shift where pests concentrate, increasing farmers' crop protection spending.34%
- Companies that profit from regional crop failures by trading dislocated supplies, or farms and equipment makers positioned to benefit when global prices spike. · Archer-Daniels-MidlandProfits from trading grain between regions where crops failed and regions where they succeeded, capturing wider price gaps when regional harvests diverge sharply., Bunge GlobalA grain trader with significant South American operations that profits from buying crops where they were produced and selling where supplies fell short., Darling IngredientsEl Niño's Pacific warming collapses the Peruvian anchovy fishery, forcing feed makers to buy rendered substitutes that this company supplies., The AndersonsStores and handles US grain that becomes more valuable when harvests fail in Asia and Australia while US crops perform normally or better., AdecoagroArgentine farms typically receive above-average rainfall during El Niño, positioning this company to harvest strong yields while global prices spike from supply shortfalls elsewhere., Deere & CompanyFarm income surges when crop prices spike, creating delayed demand for equipment purchases as farmers deploy windfall profits into capital improvements.29%
- Direct exposure to agricultural commodity prices, which typically rise when harvests fail across major producing regions. · Invesco DB Agriculture FundHolds a diversified basket of crop futures including sugar, corn, wheat, soybeans, coffee and cattle, so it captures broad food price increases even if individual crops avoid damage., Teucrium Sugar FundSugar prices tend to spike when monsoon failures dry out India and Thailand together, the most common El Niño pattern for cane-producing regions., Teucrium Wheat FundWheat prices spike when Australia, a top global exporter, experiences drought during El Niño, tightening global wheat supply., Teucrium Corn FundCorn supply tightens when global harvests come in short, and as the primary feed grain it affects pricing across all livestock sectors.27%
- Cash10%