June 12, 2012

The US Climate Prediction Centre warned on Thursday (June 7) that there is a 50% chance the feared El Nino weather pattern which can trigger droughts in Southeast Asia and Australia and floods in South America may strike later this year.

In its strongest prediction so far that El Nino could emerge, the CPC said conditions are still expected to be neutral between June and August, but there is a 50% likelihood that El Nino will develop in the remainder of the year. Forecasters have already said they expect the Atlantic hurricane season, which started on Friday (June 8) and runs to November 30, to be less active than last year.

Analysts have highlighted soy, palm oil and sugar as crops that could be drastically hit by a return of El Nino, affecting many Asian-Pacific economies. While drier conditions could benefit crops such as coffee and cocoa, which were hit by heavy rains last year, analysts have warned that prolonged heat can also hurt yields.

Asia produces nearly 40% of global wheat supplies and the bulk of natural rubber output. China, a key buyer of overseas corn in recent years, could be forced to step up imports. Australian wheat production could also be hit if the country experiences lower-than-average rainfall during the El Nino season. Australia's Bureau of Meteorology said last month that models it tracks indicate a possible return of El Nino in the second half of the year.

The CPC issues an El Nino watch when conditions are favourable for the coming six months. In its last update in May, it said it was still uncertain if it would develop. The CPC forecast will be closely watched by the US crude oil industry as El Nino reduces the chances of storms in the Gulf of Mexico that could topple platforms and rigs there.