El Niño causes a change in numerous aspects of life, beyond simply temperature and precipitation. Although the worldwide economy is extremely volatile on its own, there is no doubt that a correlation exists between the El Niño phenomenon and price hikes, aid shortages and other new expenses.
Commodity prices were rising in late 2015 due to supply shortages caused by El Niño conditions. Whether an agricultural region is getting too much rain, or dry conditions are leading to massive droughts, El Niño episodes tend to bring about massive disruptions in food production, leading to an increase in price for many staples.
Over a three week period beginning at the start of September 2015, dairy prices rose by 36%. During that same period, sugar prices rose by 31%, palm oil by 13.1% and wheat by 6.1%.
In September 2015, the U.N. Food and Agriculture Organization said that due to higher sugar and dairy prices, overall global food prices rose for the first time in a year and a half.
The effects of El Niño on wheat production and pricing are still somewhat contested. Although major wheat-growing areas can be negatively affected by both heavy rains and drought during El Niño, other areas can benefit. Australia’s wheat harvest for 2015 ended up above average, despite very dry conditions related to El Niño in July and September. On January 12, 2016, the U.S. Department of Agriculture noted that global wheat production and global supplies were both at record highs.
For several years, the world has slowly been running into a cocoa deficit as demand increases, yet supply dwindles, leading to increased prices on chocolate. During the 2015-2016 El Niño episode, rainfall lessened in countries like Ghana, a heavy producer of cocoa beans, further diminishing supply.
Coffee beans also become scarcer during El Niño. As any coffee connoisseur will know, there are two types of beans that can make coffee, and they both face growing challenges during El Niño episodes. The robusta bean can face unusually dry conditions in Southeast Asian locations like Vietnam, while arabica beans grown in East Africa can receive too much rain. El Niño related drought in Brazil severely cut the country’s coffee production in 2015.
El Niño may not be bad for everyone. For example, iron ore and coal exports from Australia are actually less likely to be disrupted by severe weather. Normally, mines and shipping terminals have to shut down for days at a time when cyclones hit the country’s coast. This decreases production, slows down shipping and further increases the price of iron and coal. However, El Niño episodes tend to deflect cyclones, which can allow for a steadier production timeline and keep prices from rising.