Rudi's View | 5:35 PM
With El Nino plausibly arriving later this year, potential weather impacts will increasingly gain investors' attention.
By Rudi Filapek-Vandyck, Editor
Neither the US National Oceanic and Atmospheric Administration (NOAA) or, locally, the Bureau of Meteorology (BOM) have made the official forecast just yet, but signs are pointing into the direction of another El Nino arriving later this year.
El Nino featured prominently during recent result releases by GrainCorp ((GNC)) and Elders ((ELD)). To quote our very own Corporate Results Monitor:
"GrainCorp's share price tumbled over -13% following the release of H1 financials. That had more to do with investor concerns about weather forecasts and impact on future crops."
https://fnarena.com/index.php/reporting_season/
Not that Elders shares have been better off post result release --those shares are off -21% four days after market update-- but that release combined much higher costs (disappointment) with weather related investor anxiety.
So far the official view at BOM is models are expecting the tropical Pacific to keep warming and likely reach El Nino thresholds by early winter, but an atmospheric response still needs to appear before El Nino is considered "established".
NOAA is on El Nino Watch, ascribing an 82% chance of El Nino emerging in May-July and a 96% chance it continues through the northern winter of 2026-27, while also warning peak strength remains uncertain.
The latter warning refers to the possibility of a Super El Nino arriving, which would open up the potential for more extreme weather events.
Assuming the current trend in signalling continues (and El Nino is thus on its way), the following should be expected:
- Less rainfall across much of eastern and southern Australia
- Warmer days and nights, with elevated chance of heatwaves
- Higher fire-weather risk
- Weaker snow season
To put it succinctly: it's getting warmer and drier, with regional inconsistencies. In case of a Super variant, it'll be more of the same.
El Nino Victims
My first thoughts are always: this is why I don't invest in insurance companies.
A recent update on the matter by Macquarie points out the three ASX-listed insurers --Insurance Australia Group ((IAG)), Suncorp ((SUN)) and QBE Insurance ((QBE))-- have been among prominent underperformers across El Nino periods post 2000.
Instinctively, I think this makes sense. The only way to account for the unknown risks is by applying a valuation discount and then wait and see what happens.
Has this now happened already in 2026?
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