So, since this year we were bracing up for some "stronger than normal" El Nino event, i was interested in verifying how historically commodities (grains etc - especially the ones with strong exposure to India / SEA given those are the main areas hit) behave when this happens.
Despite El Nino (and in particular stronger El Nino) not only increasing temperatures in the area and increasing the chances of violent weather events that are indeed disruptive to agriculture, it seems that not only the market completely prices in, in most cases, these events, but that even overprice them, with El Nino event generally have no/negative influence on agricultural prices (using CMOD as one of the proxies, but since it's still very heavy gold and energy, tested against other more pure "grains / agriculture" tilted ETFs such as AIGA and DBA).
If anything, it's "La Nina" that has a relatively noticeable positive correlation with commodity prices (although no strong La Nina were recorded in recent times - after 2016, so we're basing our data points here mostly on Moderate and Weak events).
A strong El Nino also always (almost, 86%) translates in a rebounce in the shape of a "La Nina" within 2 years, however the strength of the latter is not statistically correlated to the strength of the former.
This is to say, essentially, that this mental exercise (and token usage as you can imagine) was... just that. There seem to be not a trade here for now.
To be noted that even for "La Nina" that seems to be strongly correlated to positive returns, there are fewer events and they all happened in a very specific time, namely late 2010, so it sucks for extrapolating generalized conclusions.
Commodities once again confirmed worst / most convoluted asset class to trade (even worse than forex imo).