Extreme climate event expected: how to profit from it on the stock market

According to many forecasters, towards the end of 2026, the planet is expected with high probability to experience extreme weather known as "super El Niño". This phenomenon originates from the warming of the Pacific Ocean, during which the weather becomes anomalous; on one hand, temperatures skyrocket, but on the other hand, there are extreme rainfall events. Common to both cases, extreme heat waves and floods, is that agricultural crops are expected to be severely damaged. Demand will remain the same, as people will continue to need food, but supply may be dramatically affected. A basic law of economics is that if demand remains the same and supply decreases, prices soar, and this is what is expected to happen in such a scenario for agricultural commodities.

So how can you, as investors, get exposure to this? Here the matter becomes a little more complex. For those who are not going to trade bags of rice physically, it is possible to purchase certificates exposed to commodity prices. The most well-known certificate on Wall Street in this field trades under the symbol DBA, manages 1.26 billion dollars, pays a dividend of about 3%, and charges a management fee of 0.85%. When talking about these certificates, it is important to understand an essential issue: these certificates are exposed to various commodities through futures contracts, and this instrument has a cost. In addition, extreme events can cause sharp fluctuations in these certificates and "break" the correlation with commodity prices in the free market. Therefore, it is very important to act with extreme caution and check the implications very carefully. This is not about holding equity in a company.

Another way to benefit from a surge in commodity prices is to invest in shares of business companies that are expected to profit if we see a rampage upwards in food commodities. Here too, it is possible to get exposure through a certificate. On Wall Street, a certificate is traded that contains companies involved in agriculture under the symbol MOO. For example, the largest company in this certificate is the German company Bayer, which operates a large division in the field of agriculture, with products in areas such as fertilizers, seeds, and pesticides. Another company that receives a large holding in this certificate is the agricultural equipment company John Deere, whose shares recently jumped after financial results that investors liked.