Derivatives

When El Nino played pied piper

Prerana Desai | Updated on January 19, 2018

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Most agri commodities were dancing to the tune of this anomalous weather phenomenon in 2015



There are many patterns that affect global weather, but in the last couple of years El Nino has hogged the headlines because of its impact on agriculture the world over.

El Nino is a weather system that emerges due to the warming of sea surface temperatures. Warm waters off the eastern coast of South America increase sea surface temperatures (SST) and lead to diversion of moist winds from the Indian Ocean towards the eastern coast of South America. Typically, this leads to heavy showers over South America and droughts in Oceania and Asia.

However, timing also plays a major role in El Nino’s impact. In the context of Indian weather, an El Nino during June usually results in below-normal rains across India, while El Nino in September leads to heavy rainfall in the Southern Peninsula and drier weather over North India. In India, 60 per cent of all droughts in the last 130 years have been El Nino-induced. The impact on monsoons also depends on the magnitude of the El Nino event. El Nino is classified as weak, moderate, strong and very strong, based on the degree of the temperature anomaly.

The last two years in India were drought years. While 2014 saw above-normal temperature, it was not branded as an El Nino year. But the globally strong El Nino during 2015 followed an already bad season in terms of moisture stress. As a result, the south-west monsoon in 2015 ended with a 14 per cent deficit. As many as 10 states have declared drought, due to a below-normal monsoon. The unusual rainfall pattern which caused floods over Madhya Pradesh and Rajasthan during July-mid-August, on the other hand, led to excessive vegetative growth of soyabean and pulses and also led to the outbreak of the yellow mosaic virus. Meanwhile, dry and humid weather over the cotton-growing regions of North India was accompanied by white fly attacks.

The production of pulses, oilseeds, grains and cotton was worst-hit due to the erratic monsoon. No rainfall from mid-August followed by above-normal temperatures resulted in lower production for many agri crops. The lack of soil moisture has impacted the rabi sowing activity too in the case of wheat, gram and mustard. The rabi crop requires cold weather during the cropping season, but has been facing unusually warm weather this year. This could pose a threat to rabi crop yields.

Looking forward into 2016, historical data for more than 200 years suggest that El Nino only lasts for a maximum of two years.

The Australian Bureau of Climate has already predicted cooling of temperatures over tropical Pacific. The eastern tropical Pacific sub-surface has cooled by up to 3 degrees since late November, say weather trackers. Other climate models predict that the El Nino phenomenon will decay and return to neutral from the second quarter of 2016. A normal monsoon or even a weak La Nina event is likely in 2016.

Continue to plunge

There were reports that the temperature anomaly for the three-month period from August to October 2015 was the second-warmest on record, and the impact of this weather anomaly was felt throughout the world. Surprisingly, though, the prices of agricultural commodities continued to plunge to multi-year lows throughout calendar 2015! Commodity prices were obviously dancing to a fusion of weather and tunes.

Whether it turns out to be another El Nino year or not, one more year of adverse weather for Indian agriculture could play havoc with the farm economy as most of the excess stocks (particularly of grains, oilseeds, cotton, sugar, and spices) may get depleted by the end of September 2016.

In that case, not just pulses and edible oils, but many more agri-commodities will be left to the mercy of El Nino and global price volatility.

The author is Vice President, Research - Agri Value Chain, Edelweiss Group

Published on January 31, 2016

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