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. . . the current El Niño may lead to excessive rains in Brazil , which could lower sucrose content in sugarcane and cause flooding in fields . . .
Sugar In previous iterations of the weather phenomenon , global sugar output has produced mixed trends . This is due to a likely drop in production in South Asian countries being counteracted by an increase in sugar output in the world ’ s largest producer – Brazil . However , the current El Niño may lead to excessive rains in Brazil , which could lower sucrose content in sugarcane and cause flooding in fields , throwing the harvest into disarray and having a detrimental effect on sugar production .
Food inflation
With the current occurrence of El Niño likely to lead to a supply shortfall of key food ingredients , there is set to be an upward pressure on prices during the last quarter of 2023 and the first quarter of 2024 . For example , bakery and confectionery products , which require sugar and cocoa , could bear the brunt of low production and firm prices of ingredients .
This fall in the output of soft commodities is likely to cause the current trend of high food inflation – which started in 2022 after the onset of the Russia-Ukraine war – to continue throughout 2023 and as we head into 2024 .
What ’ s more , looking at the weather phenomenon from a historical perspective , it tends to coincide with rising levels of food inflation . Over the last 32 years , ten El Niño episodes have occurred , during which major regions such as the US , Europe and China witnessed higher-thanaverage food inflation levels . For instance , the 2009-to-2010 El Niño weather event saw food inflation exceed the average rate from 2000- to-2020 in all three regions .
Although El Niño is expected to play a role in shaping-up food inflation in 2023 , it will not take the driving-seat in this . Instead , the threat of economic slowdown is expected to have the greatest impact on food inflation throughout the remainder of 2023 . This is likely to be similar to what happened from 2006-to-2008 during the financial crisis , where food prices witnessed three consecutive years of strong growth , before eventually retreating in 2009 .
As episodes of El Niño typically last between nine and 12 months , the weather phenomenon will have an impact on food supply in the short-to-medium term . However , in some circumstances , they can persist for years , meaning the fall in output and subsequent high prices of key food ingredients may be here to stay for years to come . ■
For a list of the sources used in this article , please contact the editor .
Nidhi Jain www . thesmartcube . com
Nidhi Jain is associate specialist at The Smart Cube , ( a WNS company ). The Smart Cube is a global provider of strategic research and analytics solutions . It is a trusted partner for high performing intelligence that answers critical business questions , working with its clients to figure out how to implement the answers , faster . Through custom research , advanced analytics and best of breed technology , The Smart Cube transforms data into insights – enabling smart decision-making to improve business performance at the top and bottom line .
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