La Ni¤a on the heels of El Ni¤o
Hopes among commodity markets of a return to normal in world weather conditions have been put in doubt but many are wary of predicting a big impact, says Paul Solman
As the world's commodity markets labour under the weight of the Asian financial crisis and Russia's economic difficulties, one bright spot has been the prospect that the world weather systems would return to normal after the havoc created by El Ni¤o.
However, in the wake of El Ni¤o - "little boy" in Spanish - comes his sister, La Ni¤a, which is forecast to bring its own climatic changes until the middle of next year.
El Ni¤o occurs approximately every seven years and La Ni¤a is part of the same cycle. So where the little boy goes, his sister follows.
"La Ni¤a is the opposite of El Ni¤o. Where El Ni¤o was a warming of sea surface temperatures, La Ni¤a is a cooling down," says Dr Mike Davey of the Meteorological Office in London.
El Ni¤o's effects included drought in locations as far apart as Panama, the Philippines, South Africa and Costa Rica.
By contrast, La Ni¤a is expected to bring wetter weather than usual to many regions, especially equatorial Pacific, Dr Davey says. On the other side of the world, where El Ni¤o brings rain to Brazil, La Ni¤a usually brings drier weather.
However, some weather watchers are cautious about predicting the effects of La Ni¤a.
Judith Ganes, analyst at Merrill Lynch in New York, points out that, even though last year's El Ni¤o system brought big climate changes, some of the expected crop devastation did not materialise.
"Ivory Coast was expecting huge losses in the cocoa crop, but it didn't happen, so it can be dangerous to speculate," she says.
Wheat market prices rose last year on the expectation that El Ni¤o would cut supplies from Australia, one of the world's biggest exporters. But they dropped back when Australia's crop losses were offset by an unusually large harvest in the US.
Lawrence Eagles at GNI in London says: "After one of the biggest El Ni¤o events on record, a lot of people are very wary about predicting a big impact from La Ni¤a. Although last year's El Ni¤o had a big effect on weather conditions, its actual economic impact was more muted."
In some cases, such as the oilseed crops in Brazil and Argentina, El Ni¤o actually helped boost production.
Weather problems have also been blamed on El Ni¤o and La Ni¤a when such a link is questionable. Mr Eagles points out that the widespread flooding in China in the past few months has been attributed to La Ni¤a, though the cause is not certain.
Ms Ganes says: "There is a tendency to look for a cause for big changes in the weather. Last year, it was El Ni¤o; before that it was global warming."
Scientists believe La Ni¤a may be linked to greater hurricane activity, such as hurricanes Bonnie and Earl which swept the US east coast in the past month.
"Increased hurricane activity with La Ni¤a could be because El Ni¤o tends to suppress hurricane activity," says Mr Eagles. "There were fewer hurricanes last year. But it's too early in the hurricane season to see whether there has been a real increase."
Much of La Ni¤a's impact will be down to timing.
"Crops will react differently to unusually wet weather, depending on whether it arrives during the wet season or the dry season," says Mr Eagles. "El Ni¤o was so powerful this time that La Ni¤a has started a little later than usual - nearer the northern hemisphere's winter. So the wet weather might have less of an impact on crops there."
Australasia and east Asia could experience heavier rainfall as well as south-east Asia and especially Indonesia, Malaysia and Thailand. That could mean crop damage or better yields, depending on how long the rain stays, says Mr Eagles.
La Ni¤a could even provide a much needed boost to the energy sector.
"Colder than usual weather in North America and northern Europe, brought by La Ni¤a, is likely to increase demand for natural gas and heating oil," said one analyst in New York.
A sharp jump in energy prices could be the good news the oil market has been hoping for.
Financial Times |
