[MELBOURNE] The El Nino developing across the Pacific risks cutting Australia's wheat crop to the smallest in eight years, according to National Australia Bank Ltd, adding to warnings that the event may hurt yields.
A classic pattern could reduce the harvest to 20 million metric tons or even lower, agribusiness economist Phin Ziebell wrote in an e-mailed report on Thursday. That would be the lowest since the 2007-2008 season, according to government data. The bank said it's more pessimistic than the government forecaster, which this month predicted a 23.6 million-ton crop.
El Ninos can affect weather and harvests worldwide by crimping rainfall in Australia, baking parts of Asia, and dumping rain across South America. The event poses a risk for the global economy in the second half as it can hurt crops and boost inflation, according to Citigroup Inc. The El Nino is strengthening and some data patterns are similar to the record 1997-1998 event, the Bureau of Meteorology said this week.
"Although the impacts of El Nino events are disparate and difficult to forecast, severe events have been associated with drastically lower wheat yields in eastern Australia," the NAB analysts wrote. "Our forecast for wheat in particular reflects the risk of a major El Nino event occurring this year."
Australia's weather bureau warned on Tuesday that it isn't possible at this stage to determine how intense this event will be, and also that an El Nino's strength doesn't always correspond to its impact. The pattern typically brings below- average winter and spring rain to eastern Australia.
Sea-surface temperature indexes for the central and eastern tropical Pacific are more than 1 degree Celsius above average for a sixth week, it said. The last time such a broad extent of warmth extended across the Pacific was during the 1997-98 El Nino, it said. That event was the strongest on record, according to the National Oceanic and Atmospheric Administration.
Most of eastern Australia has a roughly equal chance of a wetter or drier July to September, the Bureau of Meteorology said Thursday. Australia is the world's fifth-biggest wheat exporter, according to US Department of Agriculture data.