El Nino Forecast: Trillions at Risk as Global Economy Faces Food Price Shock

The World Meteorological Organization (WMO) estimates that this year's El Nino will be strong, potentially causing trillions of dollars in losses to the global economy.

The phenomenon is expected to develop from August to October, with an anomaly or deviation in sea surface temperature of around 2.9 degrees Celsius based on average models.

El Nino's impact is felt across various sectors, including food, commodity prices, energy, logistics, and inflation.

The food sector is particularly vulnerable, with changes in rainfall patterns triggering drought or excessive rain that disrupts the production of rice, corn, soybeans, sugar, cocoa, and other agricultural commodities.

According to the European Central Bank (ECB), a moderate-strength El Nino could push real commodity price inflation by around 3 percent in six to 12 months since it began. In a strong El Nino scenario, global food prices for about two years are expected to rise, especially for soybeans, corn, and rice.

The World Bank estimates that global food commodity prices will rise 2.5 percent this year. However, a strong and prolonged El Nino could lead to much higher price increases, fueled by expensive energy and fertilizer, fuel demand, and export restrictions.