El Niño Brings Double Whammy of Weather and Economic Pressures

Australia's farm sector is facing a challenging period due to a confirmed El Niño effect and surging inflationary pressures. The Bureau of Meteorology has reported that a strong El Niño event is underway in late spring and into summer, with models indicating it could become the strongest on record since 1950.

The research division of the Department of Agriculture, ABARES, warns that the current El Niño could lead to lower spring rainfall in parts of Australia, but the impacts are uncertain. This event has coincided with non-weather factors such as rising fuel and fertiliser prices caused by conflict in the Middle East and ongoing inflationary pressure in the economy.

Fruit and vegetable producers may see varying effects due to drier growing conditions. While leafy greens, peas, broccoli, and cauliflower are likely to be affected, resulting in lower availability and higher prices for consumers later in the year, citrus, apples, and stone fruits may experience increased supply, leading to greater market availability.

The El Niño event has coincided with a decline in rainfall in southern Australia since 1970 during the main growing season. Inflation data from the Australian Bureau of Statistics show that food and non-alcoholic beverage prices were the second-largest contributor to inflation in the year to July, rising 3.2%. With the Reserve Bank of Australia's concerns centered around inflation, higher food prices look set to keep it above the bank's 2-3% target for some time.