Substantial El Nino event predicted

The last time the El Nino weather phenomenon occurred, it brought the worst drought in four decades to India. It razed wheat fields in Australia and damaged crops across Asia. Food prices surged.

A closely watched forecast by Japan on Tuesday confirmed its return this year. The Australian Weather Bureau also predicted a “substantial” event for the first time in five years.

A strong El Nino will roil economies that are heavily dependent on agriculture, particularly India, which is already reeling from bad weather. It would also unhinge supply chains of commodities such as rice, corn and palm oil. In fact, the heat is already up in some places in the Asia Pacific.

“We’ve already been hit by a three-month dry spell. We could not plant anything since January. All of us here in Taculen are praying for more rains,” said Benny Ramos, a rice farmer in North Cotabato in southern Philippines.

Prayers for rains in Asia, however, may not be answered as weather forecasts show an intensifying El Nino has set in.

The El Nino, or a warming of sea-surface temperatures in the Pacific, can lead to scorching weather across Asia, parts of Australia and east Africa but heavy rains and floods in South America. The effect of El Nino on weather in Europe and Ireland is less clear.

This year, the El Nino arrived in spring and is likely to continue into autumn, said the Japan Meteorological Agency, which was the first bureau to project the its emergence in 2015.

“Our model guidance predicts it’s going to continue to strengthen,” said David Jones, manager of climate monitoring and prediction at the Australian Bureau of Meteorolog. “A significant or substantial event is likely.”

Forecasts in May tend to be more accurate as weather models become more dependable, said Paul Deane, senior agricultural economist at ANZ Bank, Melbourne.

“Now we are getting to a point that you start having more confidence in those models,” he said.

The last El Nino led to tens of billions of dollars in economic damages in the Asia Pacific. This year, a strong El Nino could take an even bigger toll in certain countries, analysts said.

Grain prices have, however, not yet factored in the threat to supplies from an El Nino, largely because similar predictions for bad weather in 2014 did not come to pass. In fact, good crops replenished stocks last year.

In the absence of a weather premium, prices of grains such as wheat and rice remain near multi-month lows. Wheat futures , down a fifth so far this year, are near five-year lows, while Asia rice is at its weakest since June.

India: among the worst hit

Many farming communities are feeling the strain after damage from unseasonal rains this year. Now if the summer rains are below normal, rural discontent will deepen.

The monsoons are vital for India as half its croplands lack irrigation while the farm sector accounts for 14 per cent of its economy. India’s weather bureau has forecast weaker rainfall this year, citing a 70 per cent El Nino probability.

“Crops like soybean and cotton are under El Nino watch for being sown mainly in rainfed conditions,” said K.K. Singh, the head of agricultural meteorology division of the Indian weather office. “El Nino looms large over soybean areas of the central parts and cotton belts of the western and the northern regions.”

Fewer domestic soybeans, which are crushed to produce soyoil, will prompt the world’s leading edible oil importer to buy more palm oil from top producers Indonesia and Malaysia.

India’s rice crop would also be hit. While the No.2 rice exporter could use its record-high stocks to meet a local shortfall, it would leave less available for sales at a time when demand could rise from countries such as the Philippines.

More than half of the provinces in the Philippines, one of the world’s top rice importers, are already suffering from dryness which has curbed its rice output. – (Reuters, Bloomberg)