The current episode of El Nino could be the strongest since 1950, but it is unlikely to lead to global grain price rises, according to the World Bank.
El Nino occurs when the waters of the Pacific Ocean become exceptionally warm, which distorts weather patterns around the world.
It can have an impact on food prices as it adversely affects agricultural production in the southern hemisphere, especially countries in Latin America and East Asia, as well as Australia.
See also: Quarterly grain market outlook
In its quarterly Commodity Market Outlook, the World Bank said El Nino is expected to reach maximum strength between December and February, potentially lasting throughout early summer of 2016
But while recent weather forecasts suggest the current episode could be one of the strongest on record, its impact on commodity prices is likely to be local rather than global.
“The current El Nino episode is unlikely to cause a spike in global agricultural prices given ample supply of major agricultural commodities, weak links between global and domestic prices, and limited impact of past episodes,” it said.
“However, it could be a source of significant local disruptions in the most affected regions.”
The report makes the following observations:
- Central and South America. Dry conditions are expected to persist across Central America and parts of South America while wetter than normal conditions are projected in Brazil and north-east Argentina—an important production region for coffee, soya beans, and some grains.
- Australia. As of September, rainfall in most part of Australia had been below average. Australia is the world’s fifth largest wheat exporter.
- East Asia. Drier than normal conditions that developed in the summer are expected to continue, especially in Indonesia, the Philippines, Thailand, and Vietnam. This could effect rice, plam oil and natural rubber production levels.
- Central Asia. El Nino is likely to intensify snow accumulation in the mountainous areas of Central Asia, thus improving irrigation conditions for the summer of 2016 in a number of countries, including Afghanistan, Iran, Tajikistan, and Uzbekistan (the world’s fourth largest cotton exporter).
- South Asia. To date, growing conditions in South Asia have not been affected in a major way.
- Southern Africa. Drier than normal conditions are developing in Southern Africa, but the region is not a key player in any global commodity market.
- North America. Warmer than average temperatures across Canada and the northern US may hamper grain yields, but wetter-than-average conditions across the rest of the America could boost soya bean yields.