Australia Issues Further El Nino Alert as Event Seen Developing

By | May 6, 2014

Australia issued an El Nino alert on expectations the weather-altering pattern will probably develop as early as July, potentially bringing drought across the Asia- Pacific region and heavier-than-usual rains to South America.

The tropical Pacific Ocean has warmed steadily in recent months, the Bureau of Meteorology said on its website today, citing large anomalies below the surface and increasingly warm surface temperatures. Models suggested that the likelihood of an event is at least 70 percent, the government forecaster said.

El Niño’s can roil agricultural markets worldwide as farmers contend with drought or too much rain, while also curbing the incidence of Atlantic hurricanes. Forecasters from the U.S. to the United Nations have warned an event may happen this year, and ABN Amro Group NV said confirmation could trigger support for coffee, sugar and cocoa prices. Golden Agri-Resources Ltd., Indonesia’s largest palm oil producer, said yesterday an El Nino may damage supply from the Southeast Asian country next year.

“We are at El Nino alert level,” the Melbourne-based bureau said today. To qualify for that status, three of four conditions that assess sea temperatures, winds, climate models and the Southern Oscillation Index, or SOI, need to be met, with chances of an event of at least 70 percent, the bureau said.

Sugar rose 5.9 percent in New York this year as dry weather in biggest producer Brazil threatened crops, while cocoa gained 8.1 percent on expectations for a global deficit. Arabica coffee has surged 85 percent in 2014, the best-performer in the Standard & Poor’s GSCI Spot Index of 24 commodities.

Goldman’s View

Disruptions associated with El Niño’s have been most important for cocoa, coffee, sugar and palm oil, Goldman Sachs Group Inc. said in an April 13 report. The pattern would boost risks to soft-commodity price forecasts, the bank said.

El Niño’s, which are caused by the periodic warming of the Pacific, occur every two to seven years and are associated with warmer-than-average years. The last El Nino was from 2009 to 2010, and since then the Pacific has either been in its cooler state, called La Nina, or neutral.

In Australia, about two-thirds of the events since 1900 have resulted in major drought over large parts of the continent, the bureau said. The country is the world’s fourth- largest wheat exporter and third-largest shipper of sugar.

Palm oil production in Indonesia, the world’s biggest grower, may be damaged next year if an El Nino sets in during the second or third quarter of 2014, Golden Agri Chief Executive Officer Franky Widjaja said yesterday. Drier-than-usual weather has a lagged impact on production of the commodity, which is crushed year-round from fresh-fruit bunches.

Global Weather

There are signs an El Nino is imminent, presaging changes to global weather patterns, the UN’s World Meteorological Organization said April 15. The U.S. Climate Prediction Center on April 10 put the chances at 65 percent, up from 52 percent.

The SOI gives an indication of the development and intensity of an El Nino or a La Nina, and it is calculated using the pressure differences between Tahiti and Darwin, according to the Australian bureau. The index is neutral, with the approximate 30-day SOI value to May 4 at 5.2, it said. Sustained negative values below minus 8 may indicate an El Nino event, the bureau said in the update today.

“For El Nino to be established and maintained, coupling needs to occur between the tropical Pacific atmosphere and ocean, evident by further and persistent weakening of the trade winds and a consistent increase in cloudiness near the Date Line,” the bureau said. “These atmospheric characteristics of El Nino are forecast to become evident over the coming months.”

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