Warmer, drier weather because of an earlier-than-usual El Nino is expected to hamper rice production across Asia, hitting global food security in a world still reeling from the impacts of the war in Ukraine. 

An El Nino is a natural, temporary and occasional warming of part of the Pacific that shifts global weather patterns, and climate change is making them stronger. The National Oceanic and Atmospheric Administration announced this one in June, a month or two earlier than it usually does. This gives it time to grow. Scientists say there’s a one in four chance it will expand to supersized levels. 

That’s bad news for rice farmers, particularly in Asia where 90% of the world’s rice is grown and eaten, since a strong El Nino typically means less rainfall for the thirsty crop. 

Past El Ninos have resulted in extreme weather, ranging from drought to floods. 

There are already “alarm bells,” said Abdullah Mamun, a research analyst at the International Food Policy Research Institute or IFPRI, pointing to rising rice prices due to shortfalls in production. The average price of 5% broken white rice in June in Thailand was about 16% higher than last year’s average. 

Global stocks have run low since last year, in part due to devastating floods in Pakistan, a major rice exporter. This year’s El Nino may amplify other woes for rice-producing countries, such as reduced availability of fertilizer due to the war and some countries’ export restrictions on rice. Myanmar, Cambodia and Nepal are particularly vulnerable, warned a recent report by research firm BMI. 

“There is uncertainty over the horizon,” Mamun said. 

Recently, global average temperatures have hit record highs. Monsoon rains over India were lighter than usual by the end of June. Indonesian President Joko Widodo on Monday asked his ministers to anticipate a long dry season. And in the Philippines, authorities are carefully managing water to protect vulnerable areas. 

Some countries are bracing for food shortages. Indonesia was among the worst hit by India’s decision to restrict rice exports last year after less rain fell than expected and a historic heat wave scorched wheat, raising worries that domestic food prices would surge. 

Last month, India said it would send more than 1 million metric tons (1.1 million U.S. tons) to Indonesia, Senegal and Gambia to help them meet “their food security needs.” 

Challenges finding fertilizer

Fertilizer is another crucial variable. Last year China, a major producer, restricted exports to keep domestic prices in check after fertilizers were among exports affected by sanctions on Russian ally Belarus for human rights violations. Sanctions on Russia for its invasion of Ukraine don’t target fertilizers but the war has disrupted shipments of the three main chemical fertilizers: potash, phosphorus, and nitrogen. 

Bangladesh found suppliers in Canada to make up for lost potash shipments from Belarus, but many countries are still scrambling to find new sources. 

Farmers such as Abu Bakar Siddique, who cultivates 1.2 hectares (3 acres) in northern Bangladesh, had enough fertilizer to keep his yields steady last year. But less rainfall meant he had to rely more on electric pumps for his winter harvest at a time of power shortages due to war-related shortfalls of diesel and coal. 

“This increased my costs,” he said. 

Attempting to adapt

Each El Nino is different, but historical trends suggest scarce rainfall in South and Southeast Asia will parch the soil, causing cascading effects in coming years, said Beau Damen, a natural resources officer with the Food and Agriculture Organization based in Bangkok, Thailand. Some countries, like Indonesia, may be more vulnerable in the early stages of the phenomenon, he said. 

Kusnan, a farmer in Indonesia’s East Java, said rice farmers there have tried to anticipate that by planting earlier so that when the El Nino hits, the rice might be ready for harvest and not need so much water. Kusnan, who like many Indonesians uses only one name, said he hoped high yields last year would help offset any losses this year. 

Widodo, the Indonesian leader, stressed the need to manage water in coming weeks, warning that various factors — including export restrictions and fertilizer shortages — could combine with the El Nino to “make this a particularly damaging event.” 

Baldev Singh, a 52-year-old farmer in northern India’s Punjab state, is already worried. He typically sows rice from late June until mid-July, then needs the monsoon rains to flood the paddies. Less than a tenth of the usual rainfall had come by early this month, and then floods ravaged northern India, battering young crops that had just been planted. 

The government has encouraged Punjab farmers to grow rice along with their traditional wheat crops since the 1960s to improve India’s food security, even though farmers like Singh don’t typically eat rice and irrigation of rice fields has drained the area’s aquifers. But he keeps growing it, counting on the certainty of government purchases at fixed prices. 

With rain scarce, Singh may need to dig wells. Last year, he dug down 200 feet (60 meters) to find water. 

“Rice has been our ruin … I don’t know what will happen in the future,” he said. 

 
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U.S. consumer prices rose 3% in June compared with a year ago, a marked drop in the inflation rate that was the smallest 12-month increase in more than two years, the government reported Wednesday.

A year ago, the U.S. inflation rate soared to an annualized rate of more than 9%, a four-decade high, but since then it has dipped steadily. Last month’s figure is close to the 2% annual inflation rate sought by policymakers at the country’s central bank, the Federal Reserve, and a further drop from the 4% annualized figure recorded in May.

The 3% annualized advance recorded in June was the smallest since March 2021 and affords U.S. consumers further financial relief, with the Bureau of Labor Statistics saying that prices for such diverse items as used cars, gasoline at service stations, meats and airfares dropped. 

The Federal Reserve policymakers have steadily raised their benchmark interest rate over the last 16 months, boosting the cost of consumer and business borrowing in an effort to curb inflation. The Fed is expected to impose another rate increase later this month.  

But with inflation now slowing, further rate increases could be delayed or curtailed. 

The U.S economy, the world’s largest, has remained resilient in the aftermath of the coronavirus pandemic, continuing to grow. Hundreds of thousands of new jobs have been added month after month and pushed the unemployment rate to a near five-decade low.

Even so, voters have given President Joe Biden low marks for his handling of the U.S. economy because of the high inflation rate, which has squeezed family budgets, especially for the purchase of groceries and gas and monthly rental payments. 

Biden, running for a second term in the November 2024 election, was quick to take credit for the lowered inflation rate. 

“Good jobs and lower costs: That’s Bidenomics in action,” he said. “Today’s report brings new and encouraging evidence that inflation is falling while our economy remains strong. 

“Real wages for the average American worker are now higher than they were before the pandemic, with lower wage workers seeing the largest gains,” he added. “Our progress creating jobs while lowering costs for families is no accident.”

Bankrate.com economic analyst Mark Hamrick said, “The key readings of the Consumer Price Index turn out to be lower than expected across the board both on a month-over-month and year-over-year basis.”

He predicted that “the Fed will almost certainly raise its benchmark rate in a couple of weeks because officials have said as much. It remains to be seen whether they will feel compelled to raise rates further in September or beyond, but it is likely in doubt.”

The three major U.S. indexes all advanced sharply in midday trading on news of the taming of inflation. The benchmark Dow Jones average of 30 blue chip stocks was up nearly a percentage point, while the broader S&P 500 index and the tech-heavy NASDAQ exchange moved even higher.
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Global demand for all forms of energy is forecast to rise by 23% through 2045, OPEC Secretary General Haitham Al Ghais told a Nigerian oil and gas conference on Tuesday.

Oil executives and officials from the Organization of the Petroleum Exporting Countries (OPEC) have repeatedly made the case for continued investment in oil, warning that prices will otherwise spike higher.

Al Ghais also said calls to limit or stop funding new oil projects were unrealistic and unwise. He acknowledged, however, the need for technology to tackle continued fossil fuel emissions.

“Global primary energy demand is forecast to increase by a significant 23% in the period up to 2045, which means we will need all forms of energy,” he said.

“We will require innovative solutions such as carbon capture utilization and storage, and hydrogen projects in addition to a circular carbon economy, which has received a positive endorsement from the G20.”

The global oil industry needs $12.1 trillion in investment during the same period, Al Ghais said, adding the industry was not on track to reach that level of investment yet.

Sources close to OPEC have said it will likely maintain an upbeat view on oil demand growth for next year when it publishes its first outlook later this month, predicting a slowdown from this year but still an above-average increase.

OPEC’s forecast for 2024 will likely be lower than the growth it expects for this year of 2.35 million barrels per day, or 2.4%, an abnormally high rate as the world moves out of the COVID-19 pandemic.
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