The next threat to commodity supplies will be El Niño
BRAZIL WAS once a tiny exporter of maize. Within the past two decades, however, its share of global exports is expected to account for more than 30% this year. Similar success stories are found across Latin America, which is responsible for a growing share of the worlds agricultural products. This years harvest has been particularly bountiful, and helped make up for a shortfall of crops from Ukraine due to the war. But the next harvest may be much less abundant. In June the climate phenomenon called ENSO, an interaction of winds and currents in the Pacific which has global effects, moved into its El Nino phase. El Ninos like the one that has just begun bring warmer temperatures worldwide and produce specific regional weather anomalies all around the tropics. Extremes associated with past El Ninos have wreaked havoc on agriculture and other industries vulnerable to changes in weather patterns. The effects on commodity powerhouses like those in Latin America could spell trouble for global food supplies. Analysts at EIU, our sister company, reckon El Nino will bring three big changes that will affect the regions output (see map). Some areas will be drier than average; others wetter; and yet others will face soaring temperatures. An unlucky few will experience a combination of the three: Bolivia could face both drought and flooding throughout the country. The Caribbean, Central America, Colombia and western Mexico will be particularly vulnerable to drought. Drier weather towards the end of this year will hamper agricultural production and raise the risk of forest fires. Basic grains, beans and livestockall heavily reliant on rainfallwill be the most affected. Wetter conditions, meanwhile, may bring some relief to parched areas of Latin America. Argentinas fertile Pampas region, for example, could benefit from aboveaverage rainfall. A crippling drought has devastated its agriculture, which accounts for 6% of the countrys GDP according to the World Bank. Soya, maize and wheatthree crops that have fared particularly badly in the arid conditionscould benefit from El Ninos rains. Too much of a good thing, however, will raise the risk of flooding. The EIU forecasts that Perus economy will be hit between January and May next year, when heavy rains along the northern coast could damage infrastructure and reduce its agricultural and fishing output. Flooding has already destroyed irrigation canals and could bring locusts, rats and plant diseases to farm regions. Past El Nino events have had a sizeable impact on prices: in March 2017 consumer prices in Peru rose by 1.3%, month on monththe biggest jump in 19 years. Changes in temperature will bring more challenges. Crop-sizzling weather is forecast for Brazils centre-west region, the countrys agricultural powerhouse. The north and north-eastimportant producers of cotton, maize and sugarcanewill probably experience drought. But south-eastern Brazil tends to benefit from plentiful rain in the spring and summer months of an El Nino year, which can boost agricultural output. For now global prices for most staple crops remain below pre-war levels, despite a jump in wheat prices after Russia bombed Ukraines Black Sea ports. A good harvest throughout much of the world has kept supplies flowing and prices at bay. The return of El Nino could upend that.