Super El Nino: Famine Follows War?

Economists are warning that a super El Niño could lead to significant food inflation and economic risks in various regions of the world. Rory Green, chief China economist at TS Lombard, highlights the potential consequences of extreme weather combined with ongoing disruptions in energy and fertilizer markets. This summary outlines the expected challenges faced by countries like India, Brazil, and Mexico due to the super El Niño phenomenon.

1. Super El Niño Forecast and Context:

● The Japanese Meteorological Agency has confirmed the onset of a super El Niño, which may last for more than two years.

● This weather pattern typically causes hotter and drier conditions in some regions, alongside increased rainfall in others.

● Effects expected include droughts, flooding, and sharply rising food prices.

2. India's Vulnerability:

● India could face severe growth and inflation risks, particularly during the critical monsoon season.

● The Indian Meteorological Department forecasts below-average rainfall, potentially leading to drought and agricultural losses.

● Rising food and fuel prices have already pushed inflation higher, with projections that consumer price index (CPI) could exceed the Reserve Bank of India’s targets.

● The government is taking steps such as increasing food stocks to mitigate El Niño's impact.

3. Brazil's Preparedness:

● Brazil may experience inflationary pressures, but has improved resilience against extreme weather compared to previous years.

● Weather effects will be uneven, with southern Brazil likely experiencing increased rainfall while northern areas will be drier.

● The country is expected to face higher electricity costs if dry conditions affect hydroelectric power generation.

● Although food prices may be impacted eventually, the immediate effects are projected to unfold later in the crop cycle.

4. Mexico's Agricultural Concerns:

● In Mexico, agricultural prices are anticipated to rise due to adverse weather impacting crop yields.

● Historical data shows that El Niño events have led to significant agricultural inflation, particularly affecting fruits and vegetables.

● The forecasted weather conditions could complicate monetary policy for Banxico (the central bank), influencing interest rates as inflation pressures mount.

● Water supply systems, particularly in Mexico City, may also come under stress due to expected weather changes.

5. Global Food Inflation and Market Reactions:

● The potential for increased food prices is a concern not only for the mentioned countries but globally, particularly as supply-chain issues and existing inflation persist.

● Analysts express that the market has recently seen a selloff in agricultural commodities, though conditions may remain volatile.

● U. S. markets are also feeling the strain from energy shocks that could translate into food inflation.

The onset of a super El Niño presents significant risks for food prices and economic stability in various countries, with India, Brazil, and Mexico being particularly vulnerable. Each country's responses to these challenges are crucial for mitigating the potential impacts. Agricultural prices are expected to rise, and central banks may face difficult decisions regarding monetary policy in response to inflationary pressures. The ongoing situation requires close monitoring to navigate the possible repercussions on global food inflation and economic growth. 

https://www.zerohedge.com/weather/super-el-nino-famine-follows-war