BofA called New Zealand a hedge against the impact of El Niño on food markets
New Zealand may be the best place to hedge against the market impact of a strong El Niño event on global food supply chains. This assessment was made by Bank of America, according to CNBC.
The bank’s strategist, Oliver Levingston, noted that historically, El Niño has been linked to significant crop losses in key exporting countries. According to him, current risks are exacerbated by high fertilizer prices and prolonged disruptions in supply chains.
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Bank of America also noted that the significant El Niño weather phenomenon poses growing risks to the global food supply. The situation is further complicated by disruptions in the supply of resources for fertilizer production linked to events in the Strait of Hormuz.
New Zealand’s high dependence on agricultural exports means that prolonged problems with global food supply could result in a positive trade shock for the country, the bank believes. BofA expects that markets may begin to price in a more favorable outlook for New Zealand’s terms of trade. This, according to the bank’s assessment, creates the potential for a significant strengthening of the New Zealand dollar, known as the kiwi.
