Australia upgraded the likelihood of an El Nino setting in this year as the sugar investors in particular raised concerns over the weather pattern, for the threat it poses to production in Asia and Brazil.
The Australian Bureau of Meteorology said that water in the Pacific had "warmed significantly over the past two months" below the surface, heralding the rise in surface temperatures viewed as a key indicator of an El Nino.
"The tropical Pacific Ocean is currently warming," the bureau said, adding that most weather models are "showing sea surface temperatures reaching El Niño thresholds during the southern hemisphere winter".
"The chance of an El Niño occurring in 2014 has increased."
'Undermine sugar production'
While El Ninos are associated with weather anomalies in many countries, from America to Australia, with potentially large implications for farmers, the prospect of an event is currently being seized upon particularly by the sugar market.
Dry southern hemisphere weather, including the threat of an El Nino event is likely to undermine sugarcane yields in the 2014/15 season.
Standard Chartered on Tuesday, updating its agricultural commodity price forecasts, foresaw sugar prices averaging 20.0 cents a pound in the last quarter of 2014, well above the 18.72 cents a pound that March 2015 futures were pricing in.
The bank warned that "extreme weather conditions in Brazil and risks of an El Niño weather event in the second half of 2014 could undermine sugar production".
In Brazil, the top sugar producing country, El Ninos are associated with higher-than-average rainfall, which can disrupt harvesting and lower sugar content in cane, while the patterns often bring dryness to Australia's east coast sugar belt, which has indeed already suffered a dearth of rainfall.
Canegrowers, the Australian producers' group, has cut by 2m tonnes to 30m tonnes its forecast for the 2014 domestic cane crop, according to Commonwealth Bank of Australia.
'Real bullish development'
Separately, soft commodities broker Sucden Financial noted the rising mention of El Nino, while rival Marex Spectron termed the "growing probability" of the weather pattern "the real bullish development" for the sugar market in recent days.
Marex, in less comforting comments than it has previously made, said that "the real disaster would be if El Nino comes early and causes the monsoon in India to fail," although it underlined that water reservoir levels in the country, the second largest sugar producer, are "unusually high".
"But the real focus of attention is on Centre South Brazil," which is responsible for some 90% of domestic sugar output.
An El Nino, besides reducing sucrose content in cane and hampering harvests, "might increase disease and pests in cane which would have already been weakened by the earlier drought".
'Reduced yields considerably'
In 2009, during the last El Nino, "excessive rains in Centre South Brazil reduced yields considerably", Marex said.
In 1997, which witnessed the previous major El Nino event, "was the only year in the decade when Centre South Brazilian sugar production, instead of rising by about 10% a year, actually fell".
The region's output actually fell 2.3% to 11.4m tonnes in 1997-98, according to Brazilian cane industry group Unica.