El Niño Stock Watch - Winners and losers

Views 986Nov 2, 2023

The BOM, or Bureau of Meteorology, says 70% of crops could be impacted by El Nino this year.

Put simply, you could expect commodity prices to go up. And higher prices for items in your shopping trolley.

But what does this mean to the investor?

Prices of wheat and corn have already moved up to new 4-week highs. If you were a technical analyst, you might recognize wheat and corn price charts suggest their prices could continue to move up. As a fundamental investor, you might also assume their prices will also rise, as supply will drop, while demand continues.

This implies higher earnings for some companies. And higher earnings lead to share price growth.

Food companies to watch that will likely receive higher prices for their goods include$Archer Daniels Midland(ADM.US)$, $Graincorp Ltd(GNC.AU)$ and $Elders Ltd(ELD.AU)$. Also consider companies that may benefit from agricultural activity picking up, such as $Deere(DE.US)$ and $Bunge(BG.US)$.

And consider looking at ETFs such as $BetaShares Glb Agltr Coms ETF-Ccy Hdg(FOOD.AU)$ those that track the world's largest agricultural companies.

Lastly, be careful of companies that may experience slimmer margins (or profits) as a result of higher commodity prices. Such companies may include $McDonald's(MCD.US)$, $Kellogg(K.US)$, and$Inghams Group Ltd(ING.AU)$.