The Coming El Niño with Michael Ferrari

[Music] Welcome to the HC Comortis Podcast, a podcast dedicated to the Comortis sector and the people within it. I'm your host Paul Chapman. This podcast is produced by HC Group, a global search firm dedicated to the Comortis sector. [Music] Today we're talking El Nino, a dramatic shift in climate patterns that depending on intensity and duration can have profound impacts on our world, economies and the Comortis sector. And as of right now, we are back in El Nino and it is expected to be one of the strongest on records. What are the known impacts and how might the state of the world today with the closure of the straightforward moves exacerbate those impacts and what could happen if we hit super El Nino territory? Our guest is Michael Ferrari, who's currently built in running the research platform at Mobey, an AI native investment platform, targeted to retail investors. Michael has previously been on the show and has a stellar career at the centre of data, analytics, insights and building platforms to support that, at various public companies and commodity houses, such as Coca-Cola, Sengen.72, and Lately at Alfa Geo. As always, you can really support the show by leaving a positive review on the platform you're listening on. And as always, I hope you enjoy the episode. Michael, welcome back to the show. You're having a bar? So last time we had you on the show, we discussed geographical arbitrage and how important location was now in terms of citing assets, insurance and all that world, and people should go back and have a listen to that episode. I think it stands up very well, given events since and what we're about to talk about. And what we're about to talk about is El Nino, which is certainly a growing story with profound impacts both short and long-term. We're going to talk about what is El Nino, the Southern Oscillation, how is it created, what's its typical impacts, and then how intensity and duration can really shape our modern world and the commodities sector in particular. So delighted to have you on. Should we start at the very start, I guess, Michael? And what is El Nino? I'll start off by saying that no two El Ninos are alike, but in general, kind of the physical mechanism behind El Nino is we have a shift in the trade winds. So typically, the typical trade winds across the Equatorial Pacific are moving westwards. So they move from North America towards Asia. And in El Nino event, we kind of have a reverse. So the trade winds shift, the driving forces are going west to east. And then in conjunction with that, we have a warming of the Pacific Ocean, typically at the surface, but as we'll talk about probably over the course of this conversation, it starts from subsurface and the subsurface warms. And then you have this large mass of warm water that migrates westward to eastward. And so what that does, it does a lot of things. If it basically becomes a steer-in current for what happens for any atmosphere of process, that's going to occur to large scales. So it's kind of a guardrail between the likelihood of certain types of seasonal and sub-seasonal weather patterns to develop. And then of course, along with that, there's what we try to do. We look at the strength, the intensity. And look at a lot of countries of physical variables that we might look at during El Nino. And then try to put together what are the analog years? Or what are the years kind of had a similar profile. But at a large scale, the primary effects that we look for is, you know, more key to this movie, eastward. So the Americas, you know, parts of the Americas will receive kind of more of a warmer pattern that'll materialize following the event. And what it also does is it drives a lot of the precipitation that's normally available for Asia and Southeast Asia. It moves away. So that actually becomes more dry. And a lot of the typical for a convection pattern, in Asia, a lot of that precipitation energy starts to move eastward. So you're kind of pulling that away and so it's a dryness. And then a lot of that precipitation manifests itself throughout the Americas. And it is, of course, a bunch of other specifics. But those are the large mechanisms. And then, of course, we'll talk about some of the specifics during this conversation. Yeah. So this is, I guess, periodically recognized throughout history and named the child by a Caribbean fisherman, whatever it would be, which would be at uncertain times, but over a sort of decades-long cycle, you'd go from cool cold waters off the eastern Pacific coast to very warm. And you'd have a commensurate dramatic change in climate regionally. And this is, as you say, those trade winds. So normally pushing the warmth and rain westward into Indonesia and Singapore and hence that typical climate over there, you get this sudden reversal. And I don't think I'm wrong in thinking that this time, they associate that with a couple of cyclones that were sort of paired over the equator in the Asia Pacific region a six months ago, a year ago, whenever it was, and kind of stop the trade winds for long enough that this trend all started. And the story here is kind of one of intensity and duration. I think we're officially now in El Nino. There are some predictable outcomes when we are in one. Avoiding kind of like the, is this going to, is certainly this is going to be a very strong El Nino. We have yet to see where there's going to be a super El Nino. And also, critically, we don't know its duration. The last one we, we sort of, big one we had, a really big one which turned off quite dramatically and somewhat surprisingly was 23, 24. There were similar scale ones in 1996, but people can go back and look at that data and I encourage people to do. But generally speaking, let's sort of go region by region. So in El Nino, whether it's however long it lasts six months, two, three years, whatever it might be, this is a period of, there's some really related impacts. So one of you have mentioned is a drier, a drier Asia-Pacific region, right? So all of those sort of, what are the known sort of impacts? A couple of things I know. I'll just go back and piece in Taispan that is important. The end-sauce cycle, it is just that it is a cycle. And the El Nino phase of the cycle, typically that can be, there's been times where it's been as short as eight months, sometimes as two years. But there's different parts of the cycle. So if you break it into segments, and this helps for stratifying when we look at a lot of years, and you have the development of Nino, so that's the acceleration cycle. You have the El Nino itself, which is another phase. You have the declining phase, the neutral phase, and then the three flip phases on the landing side. So it's not, a lot of people just like to look at El Nino, on Nino neutral. So it actually is more than that, because as we're moving into an El Nino, it is different than it would be the conditions that when the event itself is receding. So we're going to have anywhere from five to seven individual regimes. And if there's large scale characteristics, so like right now we're in the El Nino as you mentioned, if there are characteristics that are typical, and again, I'll probably say this several times throughout the discussion, there are new toe, no two El Nino events are alike. But if there are typical events that kind of manifest themselves regularly, we can kind of start with, as I was mentioning earlier, you have a presentation moving out of Southeast Asia and Asia Pack at large. So India has a higher likelihood, and we're talking about commodities. Obviously, India is the number one or two growth of almost every agriculture commodity in the world. We start to see major origins. So India, Thailand, South, Southeast Asia, all the way into Australia, typically they have a higher likelihood of seeing a drier pattern. As you move across, for the United States, again, there are more heat manifests itself, but there also is more moisture that comes available. So typically they tend to be better years on the precipitation side in North America into probably the northern part of Mexico. As we get into South America, Brazil, obviously, again, from a commodities perspective, is the first country that we was focused on. They tend to see more the way the gesturing diverts and it brings additional precipitation into most of central to North East Brazil. There is that may have experienced a dry regime over the last few years, we'll probably see more precipitation. But the flip side of that is they do see a higher likelihood of heat stress. So, again, there's no perfect analog, but those are some of the general things that we start to see. And then the last one is that we get into the central back, like Sub-Saharan Africa. A lot of the, as the trade runes move, basically used to west out of Africa. A lot of the dust from Sahara that typically suppresses precipitation tends to migrate out over the Atlantic Ocean. And what that does is it allows more precipitation to reach some of the agricultural belts in Sub-Saharan Africa that they made me were not experiencing in this year. So, there's, you can't look at us a little bit more and say, "Okay, this is a positive or negative," because it really is a mixed bag. But again, as we get into more granular, discussions, when you get into individual countries, into the growing regions, it pays a different picture the deeper you go. But those are coming to some of the broader scale effects in a dissipative disease. Yeah, there's an ill-win that brings nobody any good. And he's a very old phrase. So, we are going to work our way through different commodity markets and then more broadly, the impacts of this. Because, again, Again, I remember reading years ago now a book where someone had mapped the El Nino events as best they could tell from climate data and weather data from ice calls and all the rest of it over dynastic changes in ancient Egypt. So it definitely has an impact. And the other thing to say here is, so we don't know that we're going to talk about intensity and duration, but I guess one of the things that's going to make all of this much harder is that we've just come off the back of an El Nino year. So people in Brazil will be very familiar with this impacts and are, and remember it. Secondly and more crucially, we're already in a world of stress supply chains, particularly with homu's. We've had significant amount of fertilizer has not reached intended markets. We'll not reach intended markets. You've got a whole supply chain is disrupted there. So even a small impact of El Nino in some regions who are already stressed from an agricultural standpoint is going to have a huge impact. And so that will be played out. And this is, we're coming at this from a market and commodities angle. But what your research and work has flagged that actually putting together the data, this could be not just a strong El Nino, but a super El Nino. And there are fewer analogues of that. One was 1877 when famines across the world, and don't want to get alarmists about this were in a different age today. But there's a huge sort of scale up impact if we start hitting a super El Nino, not just during the event, but also subsequent to the event and the resetting of global temperatures. Well, can you just give us some sense of why this is looking like a, if not a big El Nino, than a super El Nino? Let's start off with some of the analogues. So yeah, again, as long as we can reconstruct data, I mean, there's ways to kind of take this back and see over thousands of years what this like will look like. And that is reflected in both Ivecore and pollen data kind of shows this pattern that has repeated itself throughout history. But we put it in modern times. There's probably three analogues that come to mind. So the age 283 of Actors 1, 9798 was won in 2015, 2016 was the third. And for me, two of those three, I was actually trading commodities through them. So I remembered them pretty well. Age 283 is before I started. But if we kind of put it in the modern era, those are the three analogues that kind of jump out for a couple different reasons. So one, and a couple things I should mention when I start off on the Undineo. I mean, there's a variety of indicators. One thing that we always look at in the cloud, you know, is called the sub-nossalation index. So it's basically just a pressure differential between location and Darwin and D.E. And when that measure that delta is negative for three months in a row, just from a scientific perspective, you're technically in and out in the oven. And then of course, the stronger negative is tends to be a stronger event. So that's one. And then the second piece is, when we look at the specific ocean, we break it into what are called Nenial boxes. So there's a box between four. There's one, two, three and four, and then three and four separately. Then the combination of the Nenial three and four box around the equator, basically, just kind of look at this as a large aerial grid. If that is in the C-separaternmenters are elevated above a degree and a half centigrade, that's kind of the second measure that kind of confirms that we're in on the otaragers. Both of those have happened. When we look at analog years, the thing that is similar to this with the years that I mentioned is we've had a rapid acceleration. So one of the things that we always tend to look at, again, this is where, if you kind of do like the high level analysis, I always just talk about sea surface temperature, but all of this really materializes beneath the surface. So if we just kind of take a step back and we look at the sub-surface profile, right now roughly around, I kind of start to the dateline of the Pacific, but if you start to move east to somewhere between 160 west and 120 west, there's a very large mass of warm water and in a typical El Nenial, the subsurface anomalies between 100 and 200 meters at depth, they're roughly two and a half to three degrees Celsius. That's typically if you have to have this warm water mass that's wide from an aerial perspective and also it's migrating eastward. Once that surface is at the end of the Pacific, that just contributes to the warm water that with the surface water is mainly across the ocean and then you kind of have these larger scale and thumbnail over effects. But just going back to on that piece. So to go on the year, that subsurface mass is around three degrees above normal and right now anywhere from 160 to 120 west, it's actually around seven degrees centigrade warm. So I mean, that alone is just the number that jumped at the charts, right? So yeah, and you heard that right. So it wasn't seven degrees. So you've gone from three to four. This is actually seven and at the central portion of that warm mass, it may even be a little bit higher. So when I see that from a scientific perspective, that forget all the other analyzes we're looking at. And that's why I think we went from this time last year, you can probably see some of the signals pointing towards a new development. But warm water things that really got the climate community concerned is when you start to see just the aerial extent and the magnitude of that warm water anomalous. So that will come to the surface and is already starting to surface. And as it kind of rises to the surface and it combines with again that warm water surface where this would be across, then you have really significant effects. So I don't like the term super on the Eno because it just, yeah, sounds like normal sensationalizing things. But if there is a characterization of what a super on the Eno is, this looks like it's shaping up to be one. But in any event, this is really what's kind of the fuel being making this a very, very strong on. Well, let's just share those sort of recent analogues, kind of what, I don't know, that's fair thing today. So three years, I mean, there was a 23, 97, 98 and 15, 16, those were the three of them. Yeah. When you get that stronger on, because I mean, I assume every sort of research department in a commodity's house across the world is obviously got their eye on this one, right? When you get those stronger El Nino's, whether it's super or not, is that, are we talking as a function of intensity? So how much all of the predicted effects can be seeing an order of magnitude greater? Does it have any impact on duration as well? And are there any other associated, you sort of talked about on the other, a bit of a gateway for changing other climate systems we've got the AMOC and all the rest of it? What else happens when you get that level of intensive strength? Yeah, it's, at least the data that I look at and I focus on for commodity markets in particular, it's definitely more of a string and intensity issue than a duration issue. There have been really strong El Nino's in the past, maybe not the quote unquote super on Nino's, but there have been very strong events that within a month or two, the energy dissipates and it's already trying to back towards neutral. So there is, some of the literature just exhausts that over time El Nino's have actually, he used to be kind of like a seven to ten year event that that compression time has actually gotten a little smaller. So what he used to be 70 or 10 years might be four to seven years now. So you're shrinking the time between events. And then in doing that, there is some evidence that suggests that they are getting stronger as well. But as much as evidence that there is and suggestion to be stronger, there also are analogues where you've seen these strong events kind of just peter out without as much warning. So I won't focus as much on the duration, but the intensity in the strength piece is certainly something that we're thinking about to mighty markets. We're approaching the end of the year in 2026. These are going to spill over effects into 27 and from a stock perspective, a stock to use perspective probably into early 28. There are definitely markers that we should be keeping on. Yeah, and let's do that. One bit that you and I were discussing before we hit record was sort of these, also these El Nino events seem to reset the planet's temperature higher. It's not like you go cold back, that we haven't seen recently, it's cool back down to pre event, they seem to add additional warming to the earth, which is accelerating climate change, but that is another topic in some sense. Okay, let's just touch on that a little bit because it's important as we're in this world and I mean, we've always been this world, but this is really a classic example of shifting baselines and yeah, we're in 1.5 now, right? Right. We're in 1.5 and when you use a model, I mean, a lot of times these models, they're tuned to quote unquote normal, like whatever normal is. I mean, a lot of the literature suggests that a third of your period is normal. I actually advocate using a very more recent period. If you look at a third of your period, you kind of smooth out some of the peaks and valleys, and if you're trying to build a response model against what is considered normal, if you're missing some of the information, if you're really looking at where we are now, like the way this, if you break that 30-aparity into three decades, or you have these three 10 periods, the most recent is probably the most relevant for what we'd expect the response we like, and you kind of mute some of the effects if you're kind of averaging out over three years, and I honestly don't really think a very year could mean that much anyway, but that's important. This is the danger is if you're building models and you're associating, okay, what are we gonna expect things like production and yield and disease potential and other variables going to look like and you're too many against a normal. You're probably going to miss a lot of information. So that's something that I think, you know, particularly as we're in this event, it's better to look at other years even if you're outside that normal period, but look at other years that have very similar physical characteristics and then kind of construct your analogs and potential responses that way. Yeah. And an entirely other different podcast is investing in resiliency, but we'll leave that there and people will reach out to you directly with a lot of your work on that. Right. Okay. Let's, we're in danger of bearing the lead. Okay. So it's very, very strong on Nino. Possibly quote unquote super on Nino. It's going to be start really hitting our news channels in depth pretty soon. It's sort of still at the moment kind of somewhat in the sort of the investor community inside the esoteric, but it's here. It's happening. And you could just, you say you can just look at the temperature anomalies and it's going to have an impact just taking those major ag markets. Let's start, I guess with what's going to go, what is this going to happen to? What will the impact be on the eggs and soft markets? Do you, I don't know, you want to take that geographically or by particular commodity? I think by commodity because they are so interconnected now. And just the way the dynamics between how a lot of these markets interact with each other is a lot different now than it was in the past. So I think there's, if we kind of look at groups of commodities, the first one that always comes to mind when I think about it down like this is really what's happening with sugar, corn and ethanol. And we'll talk in a minute about how they're all related. But we think that commodities are logical. They go right to the grains. They go early corn and soybeans and we, things that are probably getting more or like news time. But when we think about what really matters from a macro-genop perspective, sugar is actually extremely important. And so when we look at this kind of on the new event, the two largest origins to focus on right away are going to be Brazil and India. And as I mentioned earlier, the monsoon actually got off to a slow start. They picked up recently. But if I would, I have a little more risk on on the Indy side. And I think if you look at where the primary sugar belts, sugar cane belts are in India, it's unlikely that the favorable position pattern is going to maintain itself throughout the duration of the monsoon. So I'm already looking at reduced output in India. Brazil is, they have two different belts. So the core belt in the center-child states, the Apollo and the surrounding states, they probably will have a year where they're going to see reduced impacts on the negative side. But you're going to offset that a little bit with there is a cane belt in northeastern Brazil. More than not, you'll see a dry, padded materializing here. So just from a physical stock perspective, we see upside pressure for prices, meaning downside, product on production, Brazil for sugar cane. Now what that does, it also spills over into what's happening with course. We already have kind of a tight supply demand balance of sugar. And now we add corn in with the uncertainty. And again, this is where one of the things that make commodity so fascinating is even if you're focusing on one commodity, you really have to kind of look at it in the mosaic of everything else that's happening. So sugar is going to be, to me, the one to really watch for a lot of other reasons. So what that's going to do is with the uncertainty on oil prices, when that happens, we kind of see ethanol. There is ethanol from corn and ethanol from sugar. And when there's more stress on the crude oil side, it makes the economics around diverting sugar cane for sugar consumption away from the consumption piece and more towards deriving ethanol from both sugar and corn. So if there is supply issues and there's potential petariments on the production side for sugar, where the economics are becoming more favorable for diverting sugar for ethanol, there is a potential ethanol issue that we should probably keep in mind. And it's worth monitoring pretty closely for the next few months. And then ultimately, again, I don't think anybody that says they know what's going to happen with oil prices, I probably wouldn't trust them. But there is a lot of uncertainty. I mean, day to day week to week, whether the straight from it was open and closed, plus a number of other factors on top of the fact that we still have, as we all know, the production and consumption statistics around oil is there isn't a whole lot of buffer. And when you kind of put all these things in the mix together, what starts off as a sugar story also is going to spill over to corn and ethanol and oil. And if I had to rank things, that's probably the one that I'm focusing on more than anything else. There's obviously a lot of other commodities that we're going to keep an eye on. Again, when I'm getting to the grains in oil seeds area, but probably more favorable for North America when it comes to things like soybeans and soybean meal and so good oil, just based on the kind of pattern that we expect to realize. But again, it's a global market and positive in North America. I'm still looking if I look at Argentina and kind of southern Brazil, soybean dots. It's kind of be mixed there. I mean, they will have a little bit more precipitation, but again, heat stress is going to manifest as if. It manifests, it manifests as of this year in ways that it probably hasn't in the last few years. And then of course, on top of that, and we throw wheat into the picture, Australia just has a dry signal across almost the entire continent. So these areas where we've had healthy supply buffers over the last couple of years, I would expect that to start from roting a little bit. And then above, you know, on top of everything else, when you have these geopolitical wild cards, again, related to straight home moose or other, it really just kind of paints the picture for at least a higher potential for volatile. Just so I understand. So okay. So Brazil is, there might be more precipitation. Well, on the, I guess on the eastern Pacific side, but you can get the drought in land. You get a higher heat and all the rest of it. I would, Brazil obviously is planting about pretty soon, right? Will this be a, so this would be their harvest, this, this winter impacted? Or is it going to be, I mean, against, just, I want to pin down that duration piece, this would be their harvest, this winter potentially even next year as well. Or would it just really be this winter? And it would be the, the northern hemisphere planting, it's spring impacted as well. I'm sorry, North Tyrosphere. I mean, I think planning, you might see some delayed planning just because of, in the southern portions, if we kind of break the, you know, the grain bulk into kind of a northern and southern half across east and west, it's going to be, it would look pretty similar. But northern probably would have more favorable conditions. We might see some planning delays in the south, the southern states. You kind of look at the 18 major states where grains and oil seeds are growing. But net net, these are still generally more favorable conditions than not. So I'm less concerned with North America. I think numbers will probably look pretty good on the production side. But in Brazil, again, where I think it's, I'm more concerned is not necessarily, I think the current crop that's being planted now, this is a log of rotation crop. But when we get into that second crop that has that shorter planting, planting to harvest winter, moving from 120 days down to maybe 80 to 90 days, that's where I think some of the heat stress issues may start to manifest themselves as we kind of move north of Sao Paulo. And then again, as we get into Pradova, I think the precipitation pattern will probably help. So we should see on the supply side conditions that are conducive towards for current crop to be favorable. But as we move away from this event and get into kind of the 27 fiscal year, which should be the 27, 28 marketing year, that's where it anticipates to at least again, I'm not, it's how he can really structure our trade around that. But it's just a variable that is worth monitoring now and monitoring each month because each month we had new data being kind of extend and look out a little further and kind of look at the front months will live in more certainty. I do see some potential supply issues that are going to hit South America, I'd find it in that maybe mid-27. Especially with energy costs and fertiliser costs. Yeah, exactly. They are, right? I mean, that old picture needs to be joined in. This comes back to the point. Another really key point, right? It begins. It's not that it's the crop itself is one thing, but the straighter. I mean, that might impact the US, right? The even if you won't have the same offsetting capability. Right. The other thing is when we look at that 1877 El Nino event and again, there were other factors going on. But like, that's when the monsoon actually failed in India. I mean, there are also these huge tail risks as well that you could have catastrophic crop failures if we have such a significant event. Yeah. And the line between failure and quote unquote normal monsoon, it's only like a 10 to 12 percent deviation from normal. So we're not talking about 50 or 40 percent of normal transportation. You all need a little less, I mean, relatively speaking, but you get to get about 10 to 15 percent less than normal and I will have major X and again, if this materializes, if this one materialized as the way could, we could even see large or rainfall differences. Yeah. And then we see the real concern. Yeah. And then on the softs, just thinking back through some of the episodes we've done that you've got coffee, you've got some of the sort of tree-based softs that are already in a really having a tough time of it as a result of climate impacts. I assume that this is just injecting uber volatility here while pricing increases into those categories as well because again, if actually those regions of some of them are going to be hot, they might be offset by others. But again, it's going to be challenging to navigate. Yeah, I mean, we just got to look at both of those. It's fun because I watch Poffy and Cocoa pretty closely. I expected to see a little bit more volatility in those where now just based on the uncertainty. But it's certainly variable to watch. And if we look at Cocoa, I mean, again, from an origin perspective, you have two countries that produce two thirds of the world. Cocoa was aggregate. We're already at a relatively, again, from a. I'm always going back to the supply side. If you have healthy stocks and from stocks being supplies, you can withstand some of these disruptions. But we already are kind of tight stocks. West Africa looks like it should be okay, but not. You look at a lot of the crops that are. And this goes for coffee and Cocoa. You kind of have these alternate bearing years. And when you have a year where they produce really well, they tend to be a little. They can serve more energy the following year. And there is a little bit of an offtake. So we're actually on the upper part of that trend for both Cocking Cocoa and a lot of major origins, particularly in West Africa. So I'm less concerned with impacts there, but again, India and Indonesia, where a lot of beans are sourced from when these dry patterns materialize, even if they're on the upside of that curve on the ultra-period-year cycle, if there's no water, it doesn't matter, right? And that's what a lot of people feel. If we try to engineer all these traits into these varieties that can withstand less water, but when there's almost no water, it doesn't matter. Yeah. Talking of water on this sort of rapid, toured horizontal of kind of the impacts and obviously I think this is probably more of a brief sort of raising awareness that actually, yes, there's an El Nino, we're in one, but it could be a really intense one. And there's all these other exogenous factors going on. There's also the complexity of climate systems that can. I mean, I went down a rabbit hole yesterday watching how this might accelerate the melting of the North Pole, accelerate the shutdown of the AMOC, which would plunge basically where I grew up and notting them into it in sort of an ice age, which, anyway, that aside. But talking about water, what is it? This will also have big impacts on energy. Let's start with hydroelectric, big source of water of energy in South America, Northern Europe. What happens there in analog events? Again, this is one of those instances where particularly for areas that are hydrodependent and they need to see reservoirs recharge for, again, North America and a lot of South America, they'd probably be on the favorable side. So areas where we've seen lower levels, both in groundwater as well as in storage levels for behind dams, for ager power, Brazil and the kind of Northwest in California, like a lot of the rain that kind of. This is a good feeling to call it a rhodi really kind of thing. Absolutely. This is really going to help. Again, you say going up and up and up, because I was saying you things happen, you just don't know, but it's more likely than not to see a favorable water balance materializing to help those origins. But again, moving across the Pacific. I'm less concerned about Europe's hydro situation, but again, in the Southeast Asia, these dry cities are so pronounced and they're defined in a way that we probably haven't seen in recent years. Any areas that are both dependent on rain, shadowed agriculture as well as building up reservoir levels for ager power, I really see elevated risk in those portions of the world as well as in Southern Africa. You have this belt where South Eastern Africa is, we kind of get across the world of Africa. There will be some favorable precipitation pockets there, but you kind of stratify Africa as massive as it is in the three regimes. That's southern portion. That southern third really runs the risk for precipitation deficits, but it'll absolutely spill over into ager power. Yeah. We're going to come on to logistics and transportation shortly, because I know it's a little bit more murky, El Nino impacts on Europe, but there are some, and again, that intensity matters, but we're going to talk about the Danube and the Rhine and then what happens to the Panama Canal in this. Just talking energy markets, staying on that for a moment, we've talked about oils on its own path of various reasons. We think about energy consumption in India, in Southeast Asia, in a much hotter, less wet, 12 months or whatever it might be. How does that play out? Are we going to throw in hall moves as well, which is restricting feedstock supplies and fuel supplies to the region? It could be quite a torrid, period, high energy consumption, high prices for those regions if you were a natural gas exporter or a subscription. Absolutely. ACs are going to be cracked on. There are no way around that. This goes from North and North, even with favorability in some areas. The fact that ACs are going to be cracked and advanced going to be high, if air condition is available, the air condition won't be shut off for a long period of time. We had that kind of pattern setting up. Again, in other years past, where I think energy sensitivity due to the AI build on or anything else and the geopel of activities, the sensitivity is a bit heightened. For maybe past years, it wasn't as much. The story is not going to show a small build. A lot of times, as we're entering this portion of the season, we can go either way. I think there's almost this false level of complacency that, at least from a natural gas exporting perspective, stockpiles are high. There's enough on the ground storage right now compared to this time of the year and prior years. When you have these really long periods of high demand, that can flip pretty quickly. It's not just happening in North America. It's happening everywhere so that the pull for that gas is going to be stronger. Again, with these other wild plants, just to me, I'm not going to say what prices you don't do, but it just injects a lot more uncertainty and equation and you're like this. I have in your spouse. I was a more effective interviewer. I'd have done this earlier, but I'm still slightly hazy on duration. The word complacency triggered me in the last big event or strong event was at 2324, which was quite short in duration, so it was six months. That was six months, I believe. That's by no means an indicator that this could also just be six months in which things start to get back to normal in this time next year and we have a normal summer and normal patterns resume, spring next year. You mentioned earlier on, so if we're in this for a couple of years and we could be, that to me would seem like we would have a really tough 2027, 28th period. If we look at the, and these are kind of the ensemble of state-of-the-art models and a lot of them tend to be generally in agreement as to what they project going forward. If you look at most of the models now and a lot of the international research that's a two in the climate prediction center or just a couple that I look at quite a bit, but that's a lot of room. This is an eye-rise. And then climate or two centers is the U.S. NOAA, it's a federal government in the United States. When you look at the ensembles, the Japanese meteorological agency is another one that's very good that I kind of focus on. They all kind of have this current event peaking in the product. They're breaking into three month groups. So the October November, December of this year, that's what we're kind of calling for it to pee. Now two things that are worth noting here, just because of pee, so does it mean as soon you can move out of that, you're out of the period. This, the thing that always keep me back to, the fact that we have such a massive subsurface mass of water at that depth that was referring to earlier, energy like that doesn't, I'm kind of going back to my set earlier. Sometimes these events can turn up pretty quickly. There is so much energy that would actually need to get transferred from one face to another with this type of event that I don't see a short event material as a given. So even if the quote-unquote peak is that October, December period, this will have effects that not just materialize, but materialize in the linger for probably the following, even kind of a 10, 12 months in quite possibly even into 20s, 28. But I think if we're looking at the calendar year of 2027, we can expect a linear like impacts to be very prominent for the major, a good part of the year and certainly spill over into the following year. Yeah. And how worried, let's say we're having this conversation in January and they're still not yet predicted a peak, all that peak is sort of maintained in those three month blocks. I mean, if we are in Q1 and it shows no signs of slowing or lowering an intensity, that's presumably kind of a big signal that all of these impacts we're talking about, not only be here to stay, but also might get orders of magnitude worse. Yeah, because I mean, one of the things that we do then, what we'll do the data, and one of the reasons that we can kind of foresee this event coming is we use what are called telecomicions, right? They're recording going from the deep ocean all the way to hundreds of miles in the atmosphere and there's certain patterns that you kind of know there's a memory. We kind of call this kind of memory. So if we have certain parameters line up in place, pressure, related, not necessarily precipitation, but things around, again, the steering currents, what's happening in terms of how the atmosphere, the dynamics of the atmosphere and how they're moving and what sustained readings are at certain periods of time, at certain parts around the world. It's kind of like a puzzle, right? So there's certain things that might be happening, much of a specific, and they might have a series of of lighting effects that we can kind of say with some certainty that's going to translate a certain type of pattern to have in Eastern Europe several months later, right? Just because of just the way the piece of this puzzle and mechanics behind them work together. And if this is a first, still seeing these as say we were in January 2027, and we still see these variables that are showing strong on Nino maintenance, then there's a very strong light that weren't going to be in the Alenio phase of the Alenio for at least several more months, and then he doesn't kind of move towards that peak and the preceding event for maybe six or seven months later. Again, during that portion, you're on the downward portion of the Alenio curve, you're still going to have effects of this spill over into the next three, six, nine, 12 months. So, um, do those are the kind of things that we start to see these quick turnaround. So say it does peak, and then we see a rapid drop off in some of the physical energy drivers in January, February, then we could say maybe we should compress it and expect things to return to a quite a bit normal, a little shorter, but that really is just month by month. But there are ways going back to the telepenetral piece. The pointers that we're looking at, there's variables that we're looking at now in terms of pressure levels in the atmosphere and the way certain wind patterns are behaving. It's unlikely that it's just going to peak and then reverse pretty quickly. So I would expect this even in this peak phase to be a little bit longer than normal. Yeah. Okay, let's move on to logistics and transport because we're going to bring up all this good news to everybody. Well, as we record right now, the Rhine's back at record lows. So's the Dan Neube. You've got the barb L-man Deb Strait, if not closed and certainly threatened and Hallmose definitely closed. The one thing holding it all together at the moment is the Panama Canal and the Suez, obviously the Suez as well. But the Panama Canal in the last big El Nino event, 2324, saw those record lows that needy stop traffic. And in some cases did or far fewer transport slots and very much higher prices. Yeah. Are we in a fat tale of actually having the world's commodities and logistics grind to a halt because every single major canal has been shut down? I think that's a good way to look at it, Paul. I think the world can get by, if you talk about, obviously a lot of fortune on organs, but let's just use the five you mentioned. The world will still function if two of them are closed. But if you have a scenario like we're having now where there is a higher than a higher level than normal that we could see significant disruptions to barge traffic in four or maybe even all five of them. That usually doesn't happen. And what it does, usually, you know, the outcomes are not very pretty. So I think this is a year where that type of scenario, again, you always have to kind of put this in the context of scenarios of what could happen, even if there are low probability high impact, that means they still can happen. And I think we are setting ourselves up just based on where levels are now and looking at replenishment rates. That is not off the table. And it's something that would probably encourage anybody that's really close to watching these to really focus on this year because it's usually not the case where you have that kind of risk hitting all these at one time. Yeah. I mean, it's a bit counterintuitive. Some parts of that East Coast gets warmer, but it's more precipit- the precipitation stays there. The Panama Canal is not on that beat, right? And sits sort of right at that heart on the equator where all the high temperatures are and you get a significant drying out and it's just not filling the lakes above the canal. And we'll have a- we come back to it, right? That's an oil story. That's an ag story. That's a definitely an LNG story as well as a general trade war. Yeah. What does this mean? That's a big match, right? And that's why we were always going back to the geography piece. And this goes back to some of the things that we were going back in the off-end geo podcast, Geograph Barbatrash. There are real reasons to understand where things move, right? It's not just where they're extracted, but how they're moving and how they get from point A to point B to point C. And from both the latitude and the longitude perspective, sometimes those barriers between Faber and O'Farellable, they're pretty thin areas. If you look at it up now, that happens to be one of those areas. And you can move a couple hundred kilometers north-south and you're in a completely different regime in terms of what to expect from a favorability or an unfair overall perspective. And unfortunately, just kind of a plus located, even with an area where there might be in general a more favorable situation balance, it doesn't look like it's going to help there very well. Yeah, I mean, that level of granularity is needed. And in a world that's very much fascinating. It's also kind of in a world that's used to kind of, part of the challenge is everyone sort of catastrophizing everything, right? And they, okay, if whole news shuts down, everything goes head on the handbags. It hasn't. Right. Actually, these markets are very resilient, but they're really resilient until they're not. And major, major climate impacts, especially, I think the intensity is key, but duration to me seems like you can get through one harvest, but you can't get through too. And there's all these other factors coming in, particularly with obviously the fertiliser story that's really yet to play out, I think. Although, yeah, we had a lot of activity, right? When the first one, when the, when the straight first shut down and you say, you're re-appraised to spike and then they kind of returned to normal. And I don't think the risk here is really fully-fledged. Well, I think I don't think the price is reflected. Well, I don't get it. We've got a fertiliser episode coming up that's booked. It just needs to be recorded and we can dig more, more deeply into that. And we've certainly done, done, ones on, on, uh, sulfur, uh, recently. Where, where is, I mean, I find it's fascinating and hopefully it sets a few people off. Down some rabbit holes, looking at all this. Um, and, and, but what, from a macro portfolio standpoint, is this, I mean, there weren't enough reasons to sell your stop portfolio right now. This was seem to, to, to add another one. Um, it does seem like it could be particularly negative, um, you know, for your, for the, the markets as a whole, if not create that volatility in the commodities sector that's, uh, our friends at the trading houses are, uh, used to handling. Um, yeah. But what, what, what, what, what happened in, uh, analog events to, to the markets in general and, and so forth? Of course, the answer, I think it's, it dies in depends, right? But, um, the way I kind of like to, I look at breaking the three buckets. So just from a macro perspective, I think one of the things that's really, um, could get ugly, um, again, worth monitoring is currency string at major markets, right? So, um, the whole idea, there's always kind of been this law that commodity prices are in one area and dollar strings is another area and that, that, that, it tells a nice narrative, but when you kind of look at these disruptive events, that, that playbook gets thrown out the window. So when you look at this strength between, not just the dollar itself, dollar Brazil and then dollar, um, dollar Indian rupee and then dollar yen, a lot of these, uh, these currency string relationships that are commodity dependent really start to rise in circles with this. So I just, from a macro perspective, I think the thing that I'm really looking at is, is, is FX. Um, the commodities themselves, again, I think there is a little bit of buffer built in on some of these. I think retirement, I guess, um, you can with stance and disruption and I think that'll get buffered a little bit in the price, but if you exceed and you kind of move towards these tail events, um, we can move from a very comfortable net guess picture to something that is, it was also in a short period of time. Um, so there's, again, in that role, there's winners and losers. Um, but then the third one is really just on stopper foliage themselves. There's, there's more and more evidence now that's showing it's not necessarily around climate change, but just climate volatility, like any climate regime doesn't really matter what the driver is, but there is financial impact positive and negative based on the kind of climate activity or climate regime that we're in and, um, we're talking about gas. I mean, air conditions are going to be on. There's increased demand. So if you're a producer, you're, you're refining margins, your operand margins are going to be fatter. I would think those would be places that even in this kind of scenario, we're going to finish it. The flip side is, we've been talking a lot about food and agriculture. I mean, food companies, fertilizer companies, crop protection companies, I mean, they're operating a really thin margin business to begin with. And then when you have either impact to the crop themselves, if you have impacts on raw materials, if you have your tractor company and you're typically seeing this renewal cycle that might happen every five to seven years. And if growers aren't making the operating margins that they're used to, maybe they're going to hold off and not buy a tractor for another one to year. Right. So it's the entire end-to-end and high value chain, which is a thin margin business to begin with really runs the risk for, I think, some, some, some, even more negative performance than we've seen. So certainly winners and losers. But if I had to kind of bucket them, I would say more winners on the energy side. And certainly losers on the product, the broader ag and food and beverage side. Yeah. Yeah. And it's not the year to be having a El Nino really, is it when you wrap in all this other, other pieces. There's a lot to sort of figure out. And certainly I guess it's kind of keeping, as you say, it's actually starting to get familiar with Noah's website and so forth and track both the intensity and whether that target peak shifts. Because I think this could be be certainly the consequential story of 2027 from a weather standpoint. As always, Michael, it's fascinating having you on and I know, but I guess I'll listen to this day that you have this fascinating career at various commodity houses and public companies at the centre of data insight and building the platform that underpins that. Obviously, AI has supercharged that. You've just done that at MOBI. I don't even want to give us a couple of seconds on MOBI and what you've done there. Sure. I mean, MOBI has basically having an investment platform that's geared towards the retail investor and the idea behind the company is to bring what would be in the past, considered institutional type research that was usually kind of walled off in banks and hedge funds, kind of break down those walls and putting the same kind of research on analysis in a format that's open for retail investors. So on top of what we're doing on just in general market and stock picking side, we do a lot of thematic research and all just defaults in my background. A lot of the things that I talk about are really try to work commodities into the story. A lot of people, if you're not in the commodities world, you've seen commodities and really just sort of the commodity traders, but as we, you and I know, most of the people are commodities. commodities touch everything and it doesn't matter what your portfolio is. There's a way to kind of work the climate and commodity story into any almost anything that you might be investing in. It's really trying to kind of educate users towards how we look at the world, not just through what's happening on the balance side, but what's happening on climate and commodities in the Africanomics and how that impacts where I might want to invest, where I want to play capital. And yeah, and it's actually a really interesting platform and the user base is growing and yeah, we're just hoping to keep growing. It's been a lot of fun. Yeah, and people should reach out and connect with you on LinkedIn and read your your your white papers and so forth. So, and obviously have a great commodity angle. Well, Michael, I mean, I we've gone about this little day really. It's fascinating. I can talk about this stuff for eight hours. We're taking breaths. So trying to condense it into an hour is always a challenge, but we hit the high points. Yeah, and people want to scare themselves, go and have a look at the 1877 event. Yeah, actually. I jotted that one down. I'm just going to build that one on the floor. Yeah, and then you throw in a couple of solar flares and closing the straight-le-hole moves in the pan of marketing out in 2027. We keep saying that was a tough year, but it's happening more and more frequently at the moment. And let's hope that our commodities markets day free and open allow those firms to solve problems in time-space and form as I keep saying. But Michael, Rodolde. Never Rodolde. It's enjoyable to have you back on. I hope to have you back on in the future. And we'll stay in touch. Great. Thanks, Bob. Appreciate it. Thank you for listening. To find out more about HC Group, our global offices, and our expertise in search within the commodities sector, please visit www.hcgroup.global.