How El Niño will impact global food prices

Dan Weissmann Mar 12, 2014
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How El Niño will impact global food prices

Dan Weissmann Mar 12, 2014
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Climatologists in the U.S. and elsewhere are starting to predict a likely El Niño weather pattern in the coming year. That’s when changes in the temperature on the ocean surface in one part of the world create all kinds of unusual weather in lots of other places: rains in Florida, droughts in Australia. What might that mean for global food prices?  

“Wait and see,” says Scott Shellady, a commodities trader on the Chicago Mercantile Exchange, an executive with Trean Group—and a farmer, growing corn and beans. At this point El Niño’s still a maybe. There’s other, for-sure stuff to factor for farmers to factor in right now, he says—like the prices of seed, fuel and fertilizer. “As much as El Niño gets talked about, if they put it in their business plan, they’ll probably be less profitable,” Shellady notes. 

From Shellady’s commodities-trader chair, other events are more compelling. For instance, have you heard about this disease that gives piglets diarrhea? Awful.  And it’s raising the price of pork

El Niño effects are different everywhere—more rain in California, less in India—so the effects on crops vary a lot. Commodities markets smooth out some of the bumps—but not for everyone. Purdue University economist Nelson Villoria says in some places  for instance, parts of Africa  El Niño can mean prices double for staples like rice and corn. That’s because not all countries get their food on big global markets.

“Bangladesh gets rice from India,” he says. “It doesn’t matter that rice in Uruguay or Argentina is growing strongly. Bangladesh really cares about what’s happening in India.”

GIF: The sea surface temperature in the equatorial Pacific Ocean.El Niño is characterized by warm temperatures, which you can see appearing in red regions:

Here is NOAA’s official description of an El Niño and La Niña: “Sea surface temperature in the equatorial Pacific Ocean (above). El Niño is characterized by unusually warm temperatures and La Niña by unusually cool temperatures in the equatorial Pacific.” 

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