Get Ready to Weather the Price of El Niño

The return of the so-called El Niño weather phenomenon this summer is forcing agricultural commodity players, from wheat farmers in Australia to traders in high rise office blocks in Singapore, to prepare for low crop yields and heightened price volatility. Government forecasters in the U.S., Australia and Japan have each in recent weeks confirmed El Niño is back for the first time since the 2009 -10 farming season, thanks to a 4% temperature rise in sub surface sea temperatures in the eastern Pacific Ocean. Prices of wheat, corn and soybeans have spiked in the last two weeks following a long period of relative stability, in part thanks to fears El Niño will cause excessive dryness in important crop-growing regions. Yields for Australian wheat—which comprise 14% of the world’s exports -- could fall by as much as 50% according to analysts at National Australia Bank. El Niño occurs when winds in the equatorial Pacific slow down or reverse direction. That warms water over a vast area, which in turn can upend weather patterns around the world—it typically reduces rainfall in Australia and across parts of south east and southern Asia...more (subscription)