El Nino effects driving up global food prices

A flooded rice field in Candaba town, Pampanga province, north of Manila. Countries like the Philippines and Indonesia have already resorted to rice imports to bring down soaring prices at home.
A flooded rice field in Candaba town, Pampanga province, north of Manila. Countries like the Philippines and Indonesia have already resorted to rice imports to bring down soaring prices at home.PHOTO: AGENCE FRANCE-PRESSE

FAO index up 3.9%, the most in three years, as weather phenomenon damages crops

PARIS • The effects of El Nino are starting to reach the dinner table, with global food prices rising the most in three years on supply concerns for everything from New Zealand milk to sugar in Brazil and South-east Asian palm oil.

An index of 73 food prices increased 3.9 per cent, the biggest jump since July 2012, to 162 last month, the United Nations Food & Agriculture Organisation (FAO) wrote in a report on Thursday.

The return of El Nino is changing weather conditions around the world, damaging crops with too much rain in some areas and not enough in others.

The price of sugar increased more than that of any other commodity in the FAO report, soaring 17 per cent, the most since September 2010. Excessive downpours in Brazil, the world's largest producer, have slowed harvesting and reduced the amount of sweetener that can be extracted from cane.

Said Mr Abdolreza Abbassian, a senior FAO economist: "The overriding issue is the weather. There is definitely more potential for higher prices in the coming months."

The increase in prices is a reversal of the trend from earlier this year, when the FAO index steadily declined to a six-year low amid a worldwide oversupply of grain.

The jump in sugar price was also prompted by reports of crop damage from excessive dryness in producers including India and Thailand, according to the FAO report.

Vegetable oil prices jumped 6.2 per cent, the most since 2010, which the FAO said was mainly driven by higher palm oil prices on concern that El Nino-induced dry weather will hurt next year's production in South-east Asia.

Dairy costs rose 9.4 per cent, the biggest gain in two years, on concern that New Zealand's milk output will decline. With recent price increases mostly driven by fear, and sufficient stockpiles of many agricultural commodities after years of surplus production, further price gains could result in "a huge correction" should crop concerns fail to materialise, Mr Abbassian said.

TOO BIG TO FAIL

Whether El Nino gets slightly stronger or a little weaker is not statistically significant now. This baby is too big to fail.

MR BILL PATZERT, a climatologist at Nasa's Jet Propulsion Laboratory, warning that El Nino conditions are strengthening

Countries like the Philippines and Indonesia have already resorted to rice imports to bring down soaring prices at home. A Philippine government panel will recommend the import of an additional 1.3 million tonnes of rice, the country's economic planning chief said on Thursday, in the wake of crop losses from recent typhoons and dry weather caused by a severe El Nino. That is on top of the 500,000 tonnes that the Philippines has already bought from Vietnam and Thailand for shipment in the first quarter of 2016.

Indonesia has reached a tentative agreement to import 500,000 tonnes of rice from Thailand, an official at the state food procurement agency said on Wednesday. Indonesia also has an agreement with Vietnam to import up to 1.5 million tonnes of rice if needed in the wake of crop failures.

In South Africa, corn producers - desperate for rain and already in record debt - plan to implore the government to provide guarantees for new bank loans, while livestock farmers may seek cash to pay for feed after dry weather since the end of last year left grazing lands ravaged, pushing up prices.

In the Pacific Ocean, warmer waters are disrupting the food chain of marine life. The warm waters have also been linked to unprecedented harmful algal blooms along the coasts that have rendered shellfish toxic and shut down shellfish fisheries in Washington, Oregon and California in the United States.

Forecasters have warned that El Nino conditions are strengthening and the phenomenon is now "too big to fail", reported the Daily Mail.

"Whether El Nino gets slightly stronger or a little weaker is not statistically significant now. This baby is too big to fail," said Mr Bill Patzert, a climatologist at Nasa's Jet Propulsion Laboratory.

BLOOMBERG, REUTERS, NEW YORK TIMES

A version of this article appeared in the print edition of The Straits Times on November 09, 2015, with the headline 'El Nino effects driving up global food prices'. Print Edition | Subscribe