| NEW YORK, July 6
NEW YORK, July 6 A nascent El Nino weather
cycle threatens to wreak more economic havoc and disrupt raw
material production across a wide swath of the world, evoking
memories of the killer edition of 1998.
The timing could not be worse. This El Nino appears to be
developing as the world is struggling to emerge from the worst
economic conditions since the Great Depression. Eleven years
ago, a damaging El Nino occurred in the middle of the Asian
financial crisis which roiled financial markets.
"El Nino is a little bit like recession: you are in it
before you can say you have one. If it continues as it is now,
the historians will say the El Nino started in May," said David
Jones, head of climate analysis in Australia's Bureau of
Meteorology. Jones said they could declare an El Nino in
During El Nino, an abnormal warming of the waters of the
equatorial Pacific unhinges weather patterns in the
Asia-Pacific region and beyond. A La Nina weather pattern, in
which waters cool, was in place last year.
In 1998, El Nino-related storms, floods, tornadoes and
mudslides killed more than 2,000 people and caused billions of
dollars in damage to crops, infrastructure and mines.
Michelle L'Heureux, head of the U.S. Climate Prediction
Center which tracks El Nino, said this version may not approach
the one in 1998, the strongest weather anomaly in 150 years.
The CPC is an office under the U.S. National Oceanic
If the anomaly does recur with severity, drought in Asia
could lift grain prices, which are already near historic levels
due to supply shortages, while storms that would disrupt crude
production in the Gulf of Mexico may be minimized.
Mike Palmerino, U.S. agricultural meteorologist with DTN
Meteorlogix, added: "This one has a little more going for it.
But a year ago at this time it looked like we were building
toward an El Nino and everything just totally fell apart toward
the end of the summer, where all the Pacific circulation
patterns changed and we actually slipped back into a La Nina."
COMMODITIES WEATHER WATCH
Some forecasters fret that an early sign of this El Nino is
the weak annual monsoon plaguing India, one of the world's
biggest producers and consumers of everything from sugar to
The monsoon rains are the lifeblood for farmers in India.
Its faltering sugar crop is a prime reason why sugar prices are
at their highest levels in three years.
China typically turns to South America for soybeans during
the U.S. growing season. But the 2009 crops from Brazil and
Argentina are suffering from drought and U.S. soybean stocks
are at a 32-year low -- less than two weeks of normal
Shawn McCambridge, grains analyst with Prudential Bache
Commodities in Chicago, said the El Nino could "dry out the
second half of 2009 in Australia and it can also affect South
"It's developing a little too late to really have much of
an impact on the Northern Hemisphere, but the concern would be
in the Southern Hemisphere (crops)," he said.
Indonesia, one of the biggest producers of palm oil and a
large consumer of sugar and rice, faces drought.
Australia is one of the world's biggest wheat producers and
has barely recovered from the worst drought in 100 years which
hit a few years ago.
Rob Imray, general manager of grain trading and
agricultural risk management firm Farmarco, said the Australian
wheat crop is off to a good start but the southern areas could
suffer if no rain arrives in August and September.
EFFECT ON METALS?
Severe floods may disrupt mining operations in Chile, the
world's biggest copper producer, and Peru, among others.
India is the world's biggest gold buyer when farmers, whose
annual income is tied to the monsoon, buy the metal for the
festival of lights celebrating the end of their harvest in
Still, Andrew Montano, a director at bullion dealer
ScotiaMocatta in Toronto, said, "the bulk of the demand is
coming from international investors, more so than from the
In the United States, El Nino could funnel wind shear into
the Atlantic basin and hinder storm formation during the annual
Vernon Kousky, former head of the CPC, said there could "be
a suppression of Atlantic hurricane activity, provided that
further intensification of El Nino occurs during the next
couple of months."
A strong El Nino could lead to a mild winter in the
Northeast, the world's biggest heating-oil market. The snow
pack in the Western United States may also suffer and affect
hydroelectric power generation.
But Stephen Schork, editor of The Schork Report in
Pennsylvania, said the weak economy would mute the weather
phenomenon's impact on energy markets.
"There's just a lot of supply out there," he said.
(Additional reporting by Bruce Hextall and Michael Perry in
Sydney, Frank Tang and Rebekah Kebede in New York, Christine
Stebbins in Chicago, and Naveen Thukral in Singapore; Editing
by Alden Bentley, Christian Wiessner and Matthew Lewis)