Meteorologists say there strong evidence an El Niño event will hit the Pacific in the second half of 2015, bringing extremes of weather to Australia.
All key ocean monitoring areas have been more than 1 degree celsius above average for 10 weeks in a row, two weeks longer than the record in 1997.
Climate models analysed by Australia’s Bureau of Meteorology indicate El Niño is likely to strengthen.
“El Niño events typically peak during the late Australian spring or early summer, and then weaken in the new year,” the bureau says.
Here’s what the weather looks like:
Credit Suisse has analysed the financial impact of El Niño across SE Asia, the Pacific region, Australia, Latin America and the US.
The main negative impact is lower wheat production in Australia and the US, and lower palm oil in SE Asia, leading to subsequent price spikes and food inflation.
Other Australian commodities impacted include sugar cane, dairy and beef.
Credit Suisse calculates El Niño could cause a 0.37% drop in Australia’s GDP.
Those to benefit include food retailers, coal producers, Australia utilities and SE Asian palm oil producers.
Credit Suisse analyst Trina Chen forecasts a 4% rise in seasonal coal demand in China due to higher air conditioning use.
And a severe El Niño could increase coal demand in China by as much as 7.5% by August with a 20%-to-30% increase in residential electricity demand.
An El Niño event could also mean a strong rise in global oil prices six months later.
“Oil prices rise initially with higher demand for power in countries such as India and Indonesia,” says Credit Suisse. “Oil prices then remain higher as El Nino impacts production in China and the US which in turn demand more oil to sustain higher output.”
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