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Cereals, sugar, palm oil and citrus fruits… These are some examples of foods whose production should be impacted by the El Nino climatic phenomenon. For consumers, the consequences will be direct with an increase in prices in 2024, in an economic context already strained by inflation.
Never seen since 2015! The price of cocoa reached a historic level last June, with the price of a tonne literally soaring, by around 25% since the start of the year. According to data firm S&P Global Commodity Insights, cocoa stocks are set to fall to unusually low levels, based on statements shared by one of its analysts on US television channel CNBC. The dynamic is not about to stop due to the floods and humidity which are attacking the cocoa trees of Côte d’Ivoire, which provides 40% of world cocoa production. At the same time, drought in other parts of West Africa is preventing trees from providing enough pods.
Global price increases
These consequences, which may seem contradictory, are the effects of one and the same phenomenon: El Nino. This is the nickname given to a climatic event which returns on average every two to seven years and takes its origins in the waters of the equatorial Pacific, off the coast of Latin America. This is reflected in an increase in the average temperature of the planet. We feel these consequences all the more as the planet was under the influence of the exact opposition of El Nino, La Nina, which causes a cooling of the waters in this part of the Pacific.
According to the World Meteorological Organization, we can fear “an increase in precipitation in parts of southern South America, the southern United States, the Horn of Africa and central Asia”, but also “severe droughts in Australia, Indonesia, parts of southern Asia, Central America and northern America”, or even provide “hurricanes in the central and eastern Pacific Ocean”. The El Nino phenomenon started several months ago, and this was confirmed by theWorld Meteorological Organization. While the episode is expected to continue during the second half of the year, the Food and Agriculture Organization of the United Nations (FAO) has been ready since last spring. “Southern Africa, Central America, the Caribbean and parts of Asia are of particular concern, as a number of countries in these regions already face high levels of acute food insecurity. The main growing seasons fall into El Niño weather patterns typical of drier conditions. Northern areas of South America are also at risk of potential drought, while Australia normally experiences reduced rainfall.” wrote the FAO in a report published at the end of April.
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What foods would be affected by El Nino?
If we understand that cocoa will be impacted by the climatic phenomenon, it will unfortunately not be the only food. A few days ago, the world leader in credit insurance which assesses commercial risks, Coface for Trade, published a very concrete analysis of how our plate could be affected. We obviously need to measure the climate consequences on the largest producers, like Brazil, to fully understand the issues. Thus, we can fear a drop in the yields of sugar cane, soya, coffee and oranges produced by Brazil, the number one producer of all these daily essentials. India is also expected to be impacted, which should weigh on its production of potatoes, rice, wheat and sugar cane. As for Indonesia, the El Nino phenomenon is expected to cause a drop in palm oil and rice production while the Australian barley and rapeseed markets would be affected. Moreover, the professional journal France Agricole reports a potential drop of 30% in the wheat and barley harvest in the land of kangaroos for the 2023-2024 season, citing forecasts from the Australian Department of Agriculture.
For the consumer, the most visible impact will logically be the increase in prices in 2024. “The example of South-East Asia is a good illustration of this. The El Niño episodes of the last 20 years have been synonymous with inflationary pressures on foodstuffs in the region. Rice, which represents 60% of domestic consumption of cereals in the region, is thus very vulnerable to the effects of El Niño, while its water-intensive crop should suffer from rainfall levels. However, the weight of the food segment in regional consumer price indices is very significant (around 40%), raising fears of an inflationary surge in the medium term”, explains Coface for Trade.