Global Food Suppliers Brace Themselves for Return of El Nino Effect

02 May 2014 --- The El Nino effect is increasingly likely to develop this year, according to global meteorologists, but Asian food stocks are already in a strong position to cope with uncertain weather conditions. Stocks of staples such as wheat and rice are unusually high, due to big harvests last year.

Meteorologists predict an increasing likelihood of El Nino developing this year and there is a 70% chance that the weather system will develop in southern hemisphere’s winter, according to Australia’s Bureau of Meteorology. El Nino brings drier conditions to Asia and wetter weather to South America, and it can have negative impacts for food crops such as rice, cocoa, palm oil and sugar.

But reports notes that the global rice market this year is well supplied, thanks in part to Thailand’s exports, which rose by 24% from the previous year.

In India the last major El Nino occurrence, in 2009, meant that the country’s monsoon rains were 23% below normal levels, which reportedly cut rice production by 10%, as well as sugar production.

Reports suggest there is a 40% likelihood of India receiving below normal monsoon rains this year because of an El Nino effect in the Pacific Ocean.

This weather effect is also likely to have an impact on soybean production in India, according to Cargill’s EMEA Product Manager, Fluid Lecithin, Thorston Bornholdt. The country already has a limited supply of soybean crops, and it has seen a sharp rise in demand as manufacturers struggle to find non-GM sources of soy. “Next season is expected to be challenging in India because it is believed there will be an El Nino effect there, where changes in monsoon patterns will impact on crops.”

In the past El Nino effects have caused sharp rises in prices in markets for coffee, sugar, soybeans and other staple goods. El Nino can reduce cocoa production by an average of 2.4%, according to the International Cocoa Organization. This would further exacerbate the current shortfall, which has already driven prices up.