Weak El Niño conditions emerge, may impact crop prospects across origins

Weak El Niño conditions emerged across the equatorial Pacific Ocean as sea-surface temperatures crossed the threshold of 0.5 degrees Celsius above average, the US Climate Prediction Center said in its June 8 forecast.

The US climate agency said there is an 84% chance of weak conditions turning moderate November-January and a 56% chance of a strong El Niño emerging.

"In summary, El Niño conditions are present and are expected to gradually strengthen into the Northern Hemisphere winter 2023-24," the agency said in its report.

The US climate agency has forecast sea surface temperatures to be more than 1.5 C higher than average by November.

Australia's Bureau of Meteorology has forecast a 70% chance of an El Niño forming in 2023 and changed the outlook to an El Niño alert, the bureau said June 6. It forecasts that sea surface temperatures will be 2 C higher than average by October.

El Niño increases the tendency for wetter conditions in East Africa and East Asia and drier conditions, including drought, in West Africa, southern Africa, India, Southeast Asia, Australia, and the northern areas of South and Central America.

Likely impact on crop prospects

The formation of an El Niño in 2023 is likely to have a significant impact on agricultural production and may alter trade routes in the near term.

The likely El Niño may lead to poor showers over parts of Australia, Brazil, India, and Southeast Asia, which may weigh on grains and oilseeds.

Trade participants mostly agree that a severe El Niño condition would be detrimental to Australian crops. Many are looking at the timing and severity of the phenomenon and project that wheat planting would be completed beforehand.

"The timing and severity of El Niño [is important]. So far it looks like if it comes, it will come late and likely not be too severe, which will further assist in minimizing any impact," IKON Commodities CEO Ole Houe said.

For the marketing year 2023-24 (October-September), Australia is expected to harvest 26.2 million mt, down 34% on the year.

Drier weather from a potential El Niño will also affect palm oil production in Indonesia and Malaysia, which accounts for 85% of the world's palm oil supply.

El Niño's effect on Malaysia's palm oil production may be seen in the latter half of 2023 and in 2024, the director general of the Malaysian Palm Oil Board, Ahmad Parveez Ghulam Kadir, said May 26.

"If this El Niño persists for a long time, a reduction in palm oil production could reach up to 20%, as seen in 2016," Ghulam Kadir said.

On the other hand, it may help bring above-average rainfall in parts of Argentina and the US and boost the crop output in these regions. It may also boost prospects for soybean, corn, and wheat crops in the US and Argentina.