Peace and goodwill to all may be in short supply this Christmas if some long-range weather forecasters are to be believed.
There's a growing consensus among meteorologists that one of this century's potentially most serious El Nino weather systems is gathering force. If their predictions are correct, its impact on some of the world's most important staple commodity-growing regions could be devastating.El Nino, Spanish for "The Christ Child," is shorthand for an irregular appearance of warm sea surface-water in the central and eastern Pacific Ocean off South America.
It frequently coincides with Christmas but has made an earlier-than-usual entrance this year. Off Peru the surface temperature of the Pacific has suddenly risen significantly. The last serious climatic disruptions associated with El Nino, in 1982-83, caused an estimated $13.6 billion of damage to crops and livelihoods, according to estimates by the National Oceanic and Atmospheric Administration.
Michael Glantz, program director at the National Center for Atmospheric Research in Boulder, Colo., is one of several scientists who believe that El Nino is associated with unusual changes in global climate patterns. There are, he argues, correlations between El Nino and summer droughts in northern Australia, southeast Africa, northeast Brazil, parts of Asia and Central America. It may also be linked with much wetter, milder winters in the Northern Hemisphere.
This year, El Nino is "building up to be at least as big as the 1982-83 event," says Ants Leetmaa, director of the Climate Prediction Center for the National Weather Service in Washington, D.C. "Satellite and ship-borne data tell us that the Pacific's temperature rose earlier this time round.
"Some parts of the northwestern U.S. have had rainfall 200 percent above normal for the time of year. Thailand and northern India are very dry, and Australia has had abnormally low rainfall," he says. "The really nasty effects will start to come through from October."
The catalog of potential damage to commodities grows daily. A record 50 million acres of arable land is now seriously affected by drought in north China. In south China, 11 million acres have been flooded, threatening the grain harvest.
Indonesia, the world's biggest producer of robusta coffee beans, is suffering severe drought; the harvest could be 25 percent below expectations. Global cocoa production is also likely to be hit, with some analysts forecasting a drop of 10 percent.
In Australia, already in the grip of a serious drought, wheat futures for January and March 1998 rose by about $4 a ton on the Sydney Futures Exchange last week because of the El Nino scare. In Thailand, the national sugar cane board predicts that the 1997-98 crop could fall by as much as 15 percent.
Not all the news is negative.
"When anchovies disappear off the coast of Peru because of warmer waters, other fish species are attracted," says Glantz, noting that Chilean and Peruvian fishermen are "already shifting their fleets further north to be ready for the different types of catch."
Other commodities could also benefit. Simon Wilson, a director with Sabre Fund Management, a British-based commodities recovery fund, says soybean prices may benefit. "El Nino affects parts of the world where palm oil and fish oil are big crops. People look for substitutes and soya-bean oil has had very strong bull markets driven by past El Nino events."
Tropical commodities may be adversely affected. "Commodities such as coffee and cocoa would be disrupted," says William O'Neill, senior futures strategist and head of research with Merrill Lynch. "Malaysia and Indonesia, as well as west Africa and South America, will be impacted by this. I think there has been a little bit of El Nino mania that has hit some futures markets, the recent cocoa bull run being an indication of that."
"This is certainly one of the strongest El Ninos since 1982-83," agrees an analyst at Goldman Sachs. The investment bank argues that the outlook is fairly bullish for U.S. soybean exports to a South America hit by lower grain production.
But more important is the potential for severe damage to the corn crops of Indonesia, Thailand, Latin America and sub-Saharan Africa. This could reduce world supplies by up to 10 million tons: 1.5 percent of projected world consumption.
Such disruption aside, Glantz believes that each El Nino event provides an opportunity for acquiring a longer-term understanding of how to avoid natural catastrophes.
"I've been getting phone calls from insurance companies, squid dealers, fishmeal traders in Paris and coffee dealers in London," he says. "The problem is that they always come knocking when the roof is leaking. They should be seeking not just short-term quantitative information but qualitative understanding. Look at where you grow your coffee? Does it coincide with a regular El Nino drought? Then maybe you should be thinking of growing it elsewhere."
Commodity-trading nations and commodity traders are unlikely to take such a long-term view. For the moment, they'll be hoping that El Nino simply fades away.
Asked what the likelihood is of this happening, Leetmaa replies: "About zero, I guess. This one is already in the history books."