Originally Posted on the Agricultural Market Information System (AMIS) Market Monitor:

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While international wheat, maize and vegetable oil prices registered record highs and much volatility last year, rice markets kept relatively calm in view of large global supplies. Over the past seven months, however, rice prices have been generally on a rise and in some suppliers increased by more than 25 percent. The rapid emergence of El Niño, a climate pattern that describes the unusual warming of surface waters in the eastern Pacific Ocean, combined with a positive Indian Ocean Dipole raises concerns about possible impacts on rice production in South and Southeast Asia. Much will depend on the timing and strength of El Niño, especially as to whether or not normal monsoon patterns will be affected. Over the next couple of months, these climatic developments will be closely monitored by AMIS.

Current situation/Forecast:

After experiencing three consecutive years of La Niña that brought bumper crops for some and crop failures for others, we are likely heading right into an El Niño. This will make a lot of farmers happy who have been suffering these past years while shifting the agony elsewhere.

The El Niño-Southern Oscillation (ENSO) is currently neutral, but it will likely not stay that way for long. Both the Australian Bureau of Meteorology (BoM) and the Climate Prediction Center (CPC) of the National Oceanic and Atmospheric Administration (NOAA) from the US have now issued an El Niño Watch. El Niño could occur as soon as during May-June-July, with a 82 percent chance of development during that time according to NOAA CPC forecasts. After that, the chances of development continue going up with a 89 percent chance during June-July-August, followed by an 90 percent chance or greater for the rest of the year. While forecasts made during this time of the year tend to be less accurate than those later in the season, there are a lot of signs suggesting that El Niño might be just around the corner.

Strength and Precipitation Changes:

Strength matters. The stronger the ENSO event, the further reaching and the more severe the global climate impacts are likely to be. Events are broken down into either weak, moderate, strong, or very strong. By the end of the year, when El Niños typically reach their peak strength, the current forecast is for about a 50 percent chance of the event becoming a strong one. 

Should El Niño materialize and depending on its strength, average to above-average rains could occur in Central Asia, southern North America, southeast South America, southern Europe, eastern and southern East Africa, and southern and eastern China. Drier-than-average conditions could occur in Central America, the Caribbean, parts of western and northern East Africa, northern South America, Southern Africa, India, Northern China, the Maritime Continent, and Australia.

Potential Crop Impacts:

ENSO events are estimated to affect crop yields on over 25 percent of global croplands. While crop yields are not affected every year, El Niño events have been generally shown to slightly improve global-mean soybean yields, while slightly decreasing global-mean maize, rice, and wheat yields. Maize tends to be more strongly impacted than the other crops. Also, negative impacts tend to be lessened for irrigated crops compared with those that are rainfed.

How the current potential El Niño event will impact agricultural production is uncertain as no two events are the same with regards to strength, duration, or localized mitigations. However, based on historical El Niño events, some crops and regions can be highlighted as being likely to have yield impacts. For maize and soybeans, yields will likely be positively impacted in parts of the Midwest US and southeast South America, while negatively impacted in the North China Plain, southern Mexico, northeast Brazil, India, Indonesia, West Africa, and Southern Africa. For wheat, yields will likely be positively impacted for the US southern Great Plains, China, Central Asia, and southeast South America, while negatively impacted in southeast Australia. For rice, negative impacts are possible across all of Southeast Asia.

While El Niño can significantly lower crop yields in some regions, at the global level, there is a chance that the negative yield impacts in the major producing countries could be partially offset. Specifically, reductions in yields in one region might be balanced by increases in another, and vice versa. However, only when the El Niño event begins to ramp up will its true impacts on agriculture begin to be known.