Economic Effects of El Niño

ECONOMIC EFFECTS OF EL NIÑO
By www.ProfitableInvestingTips.com

http://profitableinvestingtips.com/profitable-investing-tips/economic-effects-of-el-nino
According to Bloomberg News the
Reserve Bank of Australia is going to
have to lower interest rates because
of the weather.

The worst El Niño in 18 years is
causing high temperatures and
drought Down Under. Lower growth
rates are forecast.

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The strongest El Niño in 18 years
and cooler ocean temperatures
around Indonesia will combine to
produce weather that parches
Australia’s farms and ranches.

The fall in rural production would
compound problems in an economy
already struggling with slumping
commodity prices and record-low
private-sector wage rises.

The world’s driest inhabited
continent is confronting scorching
temperatures that Goldman Sachs
Group Inc. says threaten to cut
growth in 2016 to the weakest in 24
years and could pressure the central
bank to reduce interest rates from an
already record-low 2 percent.

This is just one of the expected
economic effects of El Niño.

All of South Asia will likely see lower
crop production as rain ceases. The
USA will see a mixed picture.

El Niño in the USA and
around the World

Drought forecasting by the
National Drought Mitigation Center
refers to ENSO or El Niño Southern
Oscillation events, the scientific
description of ocean current and
wind shifts in the Southern Pacific
that set up El Niño.

Every two to seven years off the
western coast of South America,
ocean currents and winds shift,
causing water temperatures to warm
and displacing the nutrient-rich cold
water that normally wells up from
deep in the ocean.

The invasion of warm water disrupts
both the marine food chain and the
economies of coastal communities
that are based on fishing and related
industries.

In North America, particularly the
United States, the impacts of El Niño
are most dramatic in the winter.

El Niño produces winters that are
generally mild in the northeast and
central United States and wet over
the south from Florida to Texas.

Alaska and the northwestern regions
of Canada and the United States can
be abnormally warm.

This might be a result of the forcing
caused by a Pacific-North American
(PNA) pattern that is typified by a
high pressure ridge over
northwestern North America and a
low pressure trough in the
southeastern United States.

This serves as an upper-level
steering mechanism for moisture
and temperature at the surface.

Once the pattern is entrenched,
regions under the ridge can expect
little in the way of precipitation while
those in the trough can’t turn it off
and are prone to frequent flooding.

During an ENSO event, drought can
occur virtually anywhere in the world,

although researchers have found the
strongest connections between
ENSO and intense drought in
Australia, India, Indonesia, the
Philippines, Brazil, parts of east and
south Africa, the western Pacific
basin islands (including Hawaii),
Central America, and various parts
of the United States.

Drought occurs in each of the above
regions at different times (seasons)
during an event and in varying
degrees of magnitude.

The direct economic effects of El
Niño are on agriculture and
infrastructure.

Both drought and flooding reduce
crop production and flooding
damages bridges and highways as
well as buildings.

Other economic and social effects
follow.

El Niño and Commodity
Prices

Equities.com discusses U.S. grain
markets and the 2015 El Niño looks
at the last bad occurrence in 1997.

The National Oceanic and
Atmospheric Administration (NOAA)
has repeatedly stated the growing
case for the 2015-2016 El Nino
event.

While much has been discussed in
the headlines, very little of the
conversation has focused on the
commodity price impact that the
most significant El Nino weather
pattern since 1997 could have on
U.S. crops.

This week, we’ll begin our look at
how the U.S. grain markets
performed during 1997-1998 El Nino
and continue this line of thought
through the global grain markets
next week before finishing this
segment with a look at El Nino’s
impact on energy prices.

An important point of this article is
that while 58% of corn production is
in the USA and China (36% and
22%), Brazil and Argentina
combined now out produce the USA
in soybeans.

The extent that commodity
production is globalized it reduces
the risk of huge fluctuations in case
of flooding or drought.

And More

When one part of the global
interconnected economy suffers the
effects are felt everywhere.

A prolonged and severe El Niño will
cause not only economic chaos in
some areas but social unrest as well.

Islamic extremists have benefitted
from a prolonged drought across
Syria and Iraq.

The economic effects of El Nino
could precede social and political
turmoil in unstable societies across
the globe.

Economic Effects of El Niño

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