El Nino Odds Reduced by Australia as Tropical Pacific Cools

By | July 29, 2014

Australia cut the odds of El Nino, which brings drought to Asia and heavy rain to South America, after parts of the tropical Pacific Ocean cooled.

The chance of the pattern developing this year is about 50 percent, the Bureau of Meteorology said in an update on its website. The forecaster lowered its outlook to an El Nino watch from an alert, which was issued on May 6.

El Ninos can roil world agricultural markets as farmers contend with drought or too much rain. Palm oil, cocoa, coffee and sugar are most at risk, Goldman Sachs Group Inc. says. The pattern will probably develop as a weak event in late summer or early fall in the Northern Hemisphere, according to MDA Weather Services, while Commodity Weather Group LLC said last week that it may be delayed for several months.

“While the chance of an El Nino in 2014 has clearly eased, warmer-than-average waters persist in parts of the tropical Pacific” and a slight majority of climate models suggest the event remains probable for spring, which begins in September, the bureau said today. “If an El Nino were to occur, it is increasingly unlikely to be a strong event.”

While the ocean was primed for an El Nino through much of the first half, the atmosphere above largely failed to respond, the bureau said. As a result, some cooling has now taken place in the central and eastern tropical Pacific Ocean, with most of the key Nino regions returning to neutral values, it said.

Crop Risks
The odds of an El Nino are about 70 percent during the Northern Hemisphere summer and 80 percent during the fall and winter, the U.S. Climate Prediction Center said on its website dated yesterday. While the risk of an El Nino has moderated, an event developing later this year can’t be conclusively ruled out, according to Goldman Sachs.

Rabobank International warned on July 14 that the size of the global sugar deficit next season will depend on how El Nino develops. The event would spur a rally in palm oil prices, according to Dorab Mistry, director at Godrej International Ltd. National Australia Bank Ltd. said yesterday that El Nino is the biggest concern for Australia’s wheat crop, with an event in spring to probably lower yields.

Indonesia and Malaysia supply 86 percent of the world’s palm oil, Vietnam is the biggest grower of robusta coffee, India is the largest sugar producer after Brazil and Indonesia ranks third in cocoa output.

El Ninos, caused by periodic warming of the tropical 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 the Pacific has either been in its cooler state, called La Nina, or neutral since then.

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