El Nino Shows Global Reach With Australia-to-Mexico Fallout

June 1, 2015 06:40 AM
 
El Nino Shows Global Reach With Australia-to-Mexico Fallout

A strengthening El Nino will bring a drier winter to Australia’s east, while the west is set for a wetter period, the country’s forecasters said, adding to warnings the pattern may have a global impact from the rice lands of the Philippines to the food markets of Mexico.

 

The period from June to August is likely to be drier than normal in southern and inland Queensland, northern and eastern New South Wales and eastern Victoria, the Melbourne-based Bureau of Meteorology said in a monthly update on Thursday. Southern Western Australia, the country’s top wheat producer, is set for more rain than normal.

Australia declared an El Nino this month, joining weather agencies from the U.S. and Japan. Forecasters worldwide are seeking to map the probable impact of the pattern that can bake Asia, bring wetter weather to South America and crimp the frequency of Atlantic hurricanes.

The more immediate impact from the phenomenon usually appears in Asia during the Northern Hemisphere’s summer, while in North America the reaction is more mixed, said Joel Widenor, co-founder of Commodity Weather Group LLC in Bethesda, Maryland.

“It does tend to lean the U.S. to the cooler and wetter side in general,” Widenor said.

However, many of those impacts also stem from other patterns that bring high pressure to the northern Pacific that set up conditions where cool air can filter south from Canada.

Drought Risk

While the strength of the event doesn’t always correspond with its impact on Australian rainfall, it increases the risk of drought, according to the bureau. This year’s El Nino, which is intensifying, is the first since 2010.

 

“The El Nino pattern in the tropical Pacific is having a drying influence in the eastern half of the country,” the bureau said. “Elevated sea-surface temperatures in the Indian Ocean, coupled with warm temperatures in the tropical Pacific Ocean, are tending to enhance rainfall in Western Australia.”

El Ninos are caused by periodic warmings of the equatorial Pacific and can roil agricultural markets as farmers contend with drought or too much rain. Commodity prices including foodstuffs typically rise in the wake of an event, according to a working paper published by the International Monetary Fund in April, which examined the impact on 33 countries.

If the El Nino strengthens from where it is now, the impacts across Asia may become more pronounced, Widenor said.

Philippines Agriculture

In the Philippines, timely imports will be important to ease El Nino’s effect on rice and agriculture, National Economic & Development Authority Deputy Director General Manny Esguerra said at a briefing in Manila on Thursday. The effect on growth depends on how prolonged the event is, Esguerra said.

 

The Southeast Asian country, which has already reported damage to rice and corn crops from this year’s El Nino, imports rice as local output falls short of demand. The event may spur a rapid rise in Philippine food prices, the IMF said on Tuesday.

In Australia, grain farmers rely on rain through the winter to boost crop growth. Wheat output may increase 3.3 percent this season to 24.4 million metric tons, the government forecast in March. The country is the fifth-biggest exporter.

Of the 26 El Ninos since 1900, 17 have resulted in widespread drought in Australia, according to the bureau. The Australian Bureau of Agricultural & Resource Economics & Sciences is set to update its wheat forecast in June.

Hurricane Season

The Atlantic hurricane season will be less active than usual this year as the El Nino helps limit storm development, U.S. government forecasters said Wednesday. The season may produce six to 11 named storms through Nov. 30 and three to six of those storms may become hurricanes, according to the U.S. National Oceanic and Atmospheric Administration.

 

The El Nino will probably reverse a slide in agricultural prices in Mexico and boost the local inflation rate in as little as six months, according to BNP Paribas SA. Vietnam’s coffee is at most risk from the pattern due to the inconsistent nature of rainfall, according to Commodity Weather Group LLC.

The Bloomberg Agriculture Subindex, which tracks farm commodities from sugar and coffee to corn and wheat, slumped 29 percent in the past year. The gauge is about 62 percent below the record reached in May 1997. The 1997-1998 El Nino was the strongest on record, according to the National Oceanic and Atmospheric Administration.

 

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