Climatologists in the U.S. and elsewhere are starting to predict a likely El Niño weather pattern in the coming year. That’s when changes in the temperature on the ocean surface in one part of the world create all kinds of unusual weather in lots of other places: rains in Florida, droughts in Australia. What might that mean for global food prices?
"Wait and see," says Scott Shellady, a commodities trader on the Chicago Mercantile Exchange, an executive with Trean Group—and a farmer, growing corn and beans. At this point El Niño's still a maybe. There’s other, for-sure stuff to factor for farmers to factor in right now, he says—like the prices of seed, fuel and fertilizer. "As much as El Niño gets talked about, if they put it in their business plan, they’ll probably be less profitable," Shellady notes.
El Niño effects are different everywhere—more rain in California, less in India—so the effects on crops vary a lot. Commodities markets smooth out some of the bumps—but not for everyone. Purdue University economist Nelson Villoria says in some places — for instance, parts of Africa — El Niño can mean prices double for staples like rice and corn. That’s because not all countries get their food on big global markets.
"Bangladesh gets rice from India," he says. "It doesn’t matter that rice in Uruguay or Argentina is growing strongly. Bangladesh really cares about what’s happening in India."
Sea surface temperature in the equatorial Pacific Ocean. (El Niño is characterized by unusually warm temperatures.):