El Niño and La Niña: Impact on Global Agriculture and What to Expect Next
Guest Author – Mr. Naveen Kumar, Head of Rice Desk, Hectar Global.
18 June 2024, New Delhi: The past four years have brought unprecedented challenges, not only due to the pandemic but also due to dramatic climate changes driven by El Niño and La Niña. These phenomena have significantly impacted global agriculture, causing shifts in crop yields, price volatility, and supply chain disruptions.
Understanding El Niño and La Niña
El Niño warms the central and eastern tropical Pacific Ocean, causing increased rainfall in the Southern USA and Peru, and drought in regions like Australia. Conversely, La Niña cools these regions, bringing increased rainfall to Australia and Indonesia, and drought to the USA and Peru. These cycles are unpredictable; the recent La Niña lasted from 2020 to 2023, followed by El Niño in 2023 and into 2024. As a result, climate-dependent industries, especially agriculture, were significantly affected.
The 2023 El Niño had a notable impact on global agriculture, with extreme weather patterns affecting crop yields worldwide. Key consequences included shifts in growing regions, price volatility, increased disease and pest pressure, and disruptions in global trade and supply chains.
For instance, rice production saw major shifts. The USA and Pakistan produced more rice, with the USA seeing a 64% increase in 2023/2024. However, India experienced a 2.8% decrease, amounting to almost 3.8 million tonnes less.
Another major crop that saw changes was Wheat. India and the USA were able to increase production, while giants like China and Australia saw a substantial decrease.
Source: USDA PD Database June 2024
What’s to be expected next?
As of mid-2024, El Niño is waning towards neutral conditions. However the neutrality is predicted to be short-lived, with La Nina forecasted to start from August to October 2024.
What should we expect?
The forecast for La Niña in 2024 suggests a high likelihood of its development later in the year, with a 49% chance for August-October, increasing to 61% for October-December, and peaking at 62% for November-January 2025 (IRI, World Meteorological Organization).
Given the intense 2023 El Niño and the predicted La Niña, here’s how agricultural paradigms could shift globally.
1. Crop Yields:
Southeast Asia and Australia: The shift to La Niña generally brings increased rainfall, benefitting crops such as rice, sugarcane, and wheat.
South America: Brazil may benefit from enhanced rainfall, boosting soybean and corn yields in the south, while northern regions might suffer from reduced precipitation, impacting coffee production. Argentina’s wheat and soybean production could see improved conditions due to better soil moisture levels.
Africa: In East Africa, La Niña often results in wetter-than-average conditions, potentially improving crop yields for maize, sorghum, and coffee. Southern parts of Africa might experience increased rainfall benefitting maize production.
India:A stronger monsoon season due to La Niña could boost the production of rice, cotton, and other Kharif crops.
While most of these countries could benefit from the increased rainfall, an increased chance of flooding could disrupt agricultural activities.
2. Wavering Commodity Prices: Weather-related disruptions from El Niño and La Niña contribute to price volatility in agricultural commodities. For example, droughts or excessive rains can lead to supply shortages, driving up prices for affected crops such as coffee, soybeans, and wheat.
Regional variations in crop yields could also lead to uneven supply dynamics, influencing global commodity prices.
3. Supply Chains: Extreme weather events related to El Niño and La Niña can damage infrastructure, delay harvests, and affect transportation routes. This can lead to delays in the delivery of agricultural products and increased costs for storage and logistics.
Ports and transportation networks may also face disruptions due to flooding or storms. Challenges to timely exports and imports of agricultural commodities might affect markets reliant on agricultural trade.
4. Global Trade: The shifts in harvests, supply, and freight patterns could alter trade balances and affect global markets. Countries experiencing favourable conditions may increase their exports, while those facing adverse weather might need to import more to meet domestic demand. Extreme weather could also lead to rerouting and increased transportation costs, thereby affecting trade routes.
5. Change in Consumption Patterns: Prolonged supply disruptions, logistical delays, or price increases can alter demand patterns for affected commodities. For instance, unstable production volumes can shift local consumption, while price volatility may reduce demand.
Increased prices for staple commodities like rice or maize can significantly impact demand and the economy. Additionally, local government interventions to maintain food security can affect global imports and exports.
The next steps
One of the best ways to mitigate the effects of the ENSO (El Niño Southern Oscillation) cycle is diversifying supply chains.
Sourcing from multiple regions can reduce the risk of supply disruptions due to localised weather events. Encouraging local procurement too can shorten supply chains and reduce dependency on global markets, which are more vulnerable to disruptions.
At Hectar Global, we strongly believe in leveraging technology to analyze real-time data, anticipate and forecast market movements, and enable global buyers to navigate supply disruptions caused by events such as El Niño and La Niña, allowing them to make informed trade decisions.
