Transcription
Welcome back to Real Vision. I'm your host Ash Bennington. Today I'm joined by Shan Hackett, president and CEO of Hackit Financial Advisor. Sean, great to have you back with us today.
Yeah, it's great to be back. I'm looking forward to a spirit of conversation about weather and what it might mean for agricultural prices and even potentially geopolitics. We'll see where it goes.
Well, listen, it's great to have you on, especially right now. This super El Nino phenomenon is all over the news, especially in Britain. I don't know if people have seen this, uh, but this is a story, uh, that BBC just did a massive multimedia spread on a couple of days ago. I believe the Telegraph referred to it as the Godzilla El Nino. I mean, there is a lot of intensity around this story on right now. Uh, it's great to have you back. We've had you on before. We've talked about these. I find this phenomenon fascinating. Uh, give us the big picture here. 50,000 foot overview. What is happening right now?
Well, the big picture is um and we'll go over the reasons, but we're we're likely hitting into what's called a super elino, which the the definition of a super elino is when the sea surface temperatures of the central Pacific are warmer than normal by two degrees Celsius or more. That's the definition of a super elino. Just to give an you an idea since 1850 we've had like seven of these so they're not very you know we don't get a lot of them um and so when you get one or it looks like we're going to get one you know they're they're definitely talking points but I want to emphasize not every super El Nino necessarily means amplified weather volatility effects some do and some don't and what I hope to discuss today in some of the slides and conversation is why this particular super elino has a higher order risk to it. um more along the lines of what we saw in 1877 1878 which was really the last time that we had a super elino uh deliver what I would consider to be you know kind of a a 100red to 500 year type weather anomaly especially out in Asia and we think you know a lot of times people say oh the media they're hyping it up too much and we actually don't think so this time we actually think the media is getting it right and it's important to know when the media is getting it right when it's getting it wrong or when the models are getting it right or wrong. We happen to believe that the models and the media are getting it right. And if and if that is the case, the implications for many critical food supply items globally um and what what it even might mean for governments and geopolitics could be quite impactful over the next couple of years.
Yeah. And it really is interesting. You've got by the way we can bring up the deck. Uh, you've got a research deck here that we're going to walk through today. I mean when you talk about that number when you see that 1877 1878 time frame it just tells you no one alive has seen this.
No. We've had super elinos like we had one in 2015 but there was a lot of reasons that was not did not provide this kind of an impact. 1997 was another one. It did not provide this kind of impact. 1982 was another. It did not provide this type of impact. you literally have to go back to 1877 for an impact what we think could be this the first time we think we can have an impact like that and um you know not that I want this to happen but if it's going to happen preparation is the mother of skill the way we look at it so.
Yeah, well said. So we got this research deck, let's walk through.
Sure. Well, I I think the uh well the first thing is understand that we're predicting weather. Nothing ex is exact science with weather. Everyone needs to understand there can be alterations. We put we're going to talk about signposts. There's a lot of risk, could be wrong, all those things with futures, options, stocks, and that sort of thing. But um we subscribe Ash as you know that what has happened in the past is likely to rhyme in the future, especially when it comes to climate. meaning there are similar DNA markers that have happened before that if you can identify them today you can you know kind of [clears throat] get a certain idea of what could be a likely probability uh view going forward and that's what we're going to do here is we think we're DNA we're creating a DNA like 1877 1878 so.
And you've got [laughter] that great you've got that great Solomon quote there.
The big question um is why was 1877878 so bad and why have the other super elinos up to this point not delivered the same punch of weather anomaly and so I just listed five points here um and and and and I think it's and we'll go over this in more detail but it's not so much.
Let me let me ask you this Sean real quick because I I you know I I say it like I'm reading off your slide deck like I know about it I'd never heard of this 1877 7 1878 El Nino phenomenon before. Talk a little bit before we go through the reasons of why it happened, what it was that happened, how significant the impact was.
It was an all-encompassing Asian drought. What I mean by Asian drought means included India, China, Southeast Asia, uh, Australia that if so you just put a box around the entire Asian uh Asian continent. It was a widespread drought that every country experienced anywhere from a 100year to 500year drought simultaneously. So what made that drought so unusual is it wasn't just India and everyone was all was okay. It wasn't just China. It was the entire region experienced this anomaly simultaneously creating the amplified effect. That is what has not we've had droughts in India in the since we've had droughts in China but they've been isolated they haven't been this broad geographical uh extreme region and that's what high and that's what makes 1877 and 78 such a a benchmark to look at and why the media is talking about it because it it was really unusual hasn't happened since if it were to happen again as we think there's a reasons to believe that it could, you know, we we definitely need to try to understand what it means for food prices, what it means for inflation, what it means for um, you know, geopolitics because it's going to it's going to turn a the food supply chain upside down for a considerable period of time before we can put the what I we call the genie back into the bottle here. So.
Well, yeah, I mean, the the area that you're talking about geographically is is simply massive here from this uh 7778 1877 1878 time frame. What was the impact in terms of agriculture during that historical period?
We some of the greatest famines of all time if you look back at and put in search for historical famines obviously means people dying from from lack of food. Um, you look at the Indian famine, the China I mean some of the top famines of all time occurred during that two-year period. That's what it meant back then. Obviously, I think we're a little more technologically advanced today. I think we're a little more connected today. I think we probably can handle things a little better to where maybe the famine part of it will be uh doesn't mean there won't be that equation part of it, but I think maybe we we can ease back the number of millions and millions of deaths that occurred during that time. But essentially, it was one big monstrous famine that occurred because there was insufficient food to feed that large population center and there was no real way to to to to alter it or shifted until the weather improved again. I mean, that's that's really was the ramifications for it. Obviously, prices went very very high. The average uh price for rice and wheat for an as an example went up 600% uh during that period of time. um, if you look at cash prices uh during that time. So doesn't mean it has to be 600% today but just giving you an idea that it was it was not a small move u based upon the shortages that occurred uh during that period of time.
Yeah. So that gives you the context, that gives you the stakes, that gives you a little bit of a sense of what we're talking about historically at least.
Yes. Yes. And and like Alex I won't emphasize I'm not I'm not here predicting that we're going to that the effects are going to be the same. It was a long time ago where horse and buggy, you know, we didn't quite have the ability to adjust and and and and so so I don't think that the famine part of it is going be as as severe. It will still be there. It will based upon our our understanding of famines in the in modern day times, it'll seem really really bad, but compared to what occurred there, um I I don't I'm not expecting famine on that magnitude in modern day times. At least that's my anticipation. My expectation won't it won't be that bad.
Okay. Okay. So to get back to this slide, what we see here uh are five key reasons what in the uh in the view of your analysis suggests why that period 1877 to 1878 had such a severe outcome.
Well, first of all, it it did we did reach the highest sea surface temperature anomaly in the central Pacific of all time. I think it reached 2.7 degrees above normal in 18778. Um, since then the highest super Elnino I believe was 2.4. So for first of all we had the highest warmest temperature and um and that was one reason but more importantly the duration how long that warm water sat there before cooling was off the charts unusual. Meaning normally Eleno reaches a peak and then it you know it's a month or two and then it cools it quite quickly. That's the normal pattern that we're accustomed to it. We had almost a five or six month period of these warm waters remaining before it cooled off. Meaning that we had a longer period of this extreme effect that was ongoing and ongoing and and and I don't know if that's going to happen this time, Ash. I mean, obviously, that's one of the things we're going to have to watch that once we get to that peak here later in the year. How long the duration is will determine to some extent to how severe the situation will be. Uh, but all indications are that we should see sea surface temperatures uh reach close to the levels that we saw in 1877 meaning we expect the peak anomaly sea surface temperatures to reach in the upper twos on this one and we can go over the reasons why uh a little later but what I'm not sure about is the duration. That's something that we're just going to have to to wait and see if if we get the duration we had in 1877 or not. But the the the actual temperatures themselves should be right up there with all-time highs.
Yeah, as the old Neils Boore joke would have it, prediction is very hard, especially about the future. But if if people want to learn a little bit more about this, I've been just doing a little bit of research myself. Uh, so there's a Wikipedia article called the Great Famine of 1876 through 1878. uh this is focused predominantly on India in terms of this article but we're talking about excess mortality rates according to the Wikipedia of five essentially 5 to 10 million human deaths I mean just absolutely horrific.
Yeah, I mean, and China and others had similar impacts. It it was you start reading, you almost can't continue to read it. It's just this saddest thing you ever want to.
I mean, I I mean, I knew of it, but then when you start reading what actually happened, it's just unfathomable uh Ash, you to think of what weather did back then.
So.
I can see, by the way, I can see the comments now. We're not we're not predicting that's going to happen. This is just the history. This is the context.
And I'm not predicting that. I'm predicting we can have some shortages. We some people are going to have some issues. Um, we're going to have a lot of high prices, but I I'm not I absolutely don't believe in our modern-day uh connected um uh infrastructure that we're going to see sim, you know, the same types of extreme famines. I don't believe we're going to see that order of magnitude. So.
All right. So, that sets the table forward. Sean, let's go through. I know we've got some uh we've got some maps. We've got some charts here uh that might help to illuminate this hypothesis.
Yeah. So, the other points that we're going to go over is the Indian Ocean dipole. For those that aren't aware, uh, it's the sea surface temperature differential from the west uh of Africa uh of India to the east of Africa of India. And uh, if it's negative that means the waters to the west are cooler. If it's positive it's warmer. Uh, typically super elinos have been associated with positive Indian Ocean dipole just means the warm water is on the west side of India. Just for those that know warm water air rises and produces moisture above it. So usually what this means is that you tend to get more moisture on the west Asian side and you get more drought on the East Asian side. I mean it's it's kind of like half bad half good not an entire Asian continent. But if it's more neutral, if it's more um negative to neutral then you can have then you don't get that effect. It's then even everybody would be in involved with the El Nino effect. Right now we're at in a negative Indian Ocean dipole. Our work and the work of the model suggest we should stay more neutralish through at least the summer growing season, which is really the critical season for Asia. If that were to occur, then that allows the entire region like 1877 to get involved in this, which was the case back in 1877. And the other really unusual point that I really want to bring home is that we're we're used to here in America that we see these Saharin dust winds winds that bring all this dust over to the Caribbean and help suppress moisture in the atmosphere and lower the Atlantic hurricane season activity. Well, the same thing happens in the Arabian Peninsula, but it goes the opposite way. It goes towards India, towards China. And typically if you have an El Nino and a more neutralish Indian Ocean dipole, these winds get stronger. And if you push enough dust in the atmosphere, it suppresses the atmospheric moisture and it suppresses the monsoon even further. Right now, we have some of the highest concentrations of of Arabian Peninsula sand in the atmosphere that we've seen since 2002. in 2002 by the way was the one in 100 one in 50 year to one in 100 year drought in India as an example of this effect but that was not a super elino that was more like a weak moderate elino didn't cause a broad effect but did cause a big big effect for India and lastly the western Pacific typhoon season tends to be very very active when you have uh a strong El Nino and a neutralish Indian Ocean dipole and What that tends to happen for those that know what hurricanes do, they suck all the moisture around it to it and then take it away from it. So if we have a very active western um typhoon season, it'll suck even more moisture out of Asia and brings it up into the Arctic. And we are seeing that.
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