The next threat to commodity supplies will be El Niño

Could Ukraine’s allies be sending it more weapons?

Its arsenal is still dwarfed by Russia’s

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 world’s agricultural products. This year’s 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 world entered its “El Niño” phase, one of three stages of a weather phenomenon which brings warmer sea temperatures to the Pacific Ocean and triggers extreme weather events across the world. Past bouts of El Niño have wreaked havoc on agriculture and other industries vulnerable to changes in weather patterns. For commodity powerhouses like those in Latin America, that could spell trouble for global food supplies.

Analysts at EIU, our sister company, reckon El Niño will bring three big changes that will affect the region’s 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 livestock—all heavily reliant on rainfall—will be the most affected.

Wetter conditions, meanwhile, may bring some relief to parched areas of Latin America. Argentina’s fertile Pampas region, for example, could benefit from above‑average rainfall. A crippling drought has devastated its agriculture, which accounts for 6% of the country’s GDP according to the World Bank. Soya, maize and wheat—three crops that have fared particularly badly in the arid conditions—could benefit from El Niño’s rains.

Too much of a good thing, however, will raise the risk of flooding. The EIU forecasts that Peru’s 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 Niño events have had a sizeable impact on prices: in March 2017 consumer prices in Peru rose by 1.3%, month on month—the biggest jump in 19 years.

Changes in temperature will bring more challenges. Crop-sizzling weather is forecast for Brazil’s centre-west region, the country’s agricultural powerhouse. The north and north-east—important producers of cotton, maize and sugarcane—will probably experience drought. But south-eastern Brazil tends to benefit from plentiful rain in the spring and summer months of an El Niño 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 Ukraine’s Black Sea ports. A good harvest throughout much of the world has kept supplies flowing and prices at bay. The return of El Niño could upend that.■