The likely return of La Niña could bring volatility to global commodity markets. Countries such as India (producing rice, wheat, and sugarcane), Indonesia and Malaysia (producing palm oil and rice), and Australia (producing barley and canola) are likely to experience substantial increases in agricultural output. This boost is expected to lower commodity prices and help alleviate inflation risks in these areas. Meanwhile, heavier and more frequent rainfall may disrupt the transport and extraction of key minerals in Southeast Asia. La Niña exacerbates the risk of flooding and landslides in Indonesia, where the mining of coal, copper, nickel, and bauxite is already frequently disrupted due to heavy seasonal rainfall. And in the energy sector, La Niña often leads to colder-than-average winter temperatures in North Asia, driving short-term increases in the demand for thermal coal and natural gas.
The effects of La Niña are highly contingent on the event’s strength and duration. Historical data show that La Niña’s impact on commodity prices varies. Some events cause price increases due to supply reductions or higher production costs from extreme weather, while others lead to lower prices if increased production in certain regions offsets disruptions elsewhere. Broader economic conditions, sector-specific factors, and government policies also influence La Niña’s impact. Governments can mitigate these effects by enhancing early warning systems, improving infrastructure resilience, managing water resources, supporting vulnerable populations, and coordinating disaster preparedness efforts.
