Food price spikes seen unlikely even with El Niño

MANILA, Philippines—Food prices boiling over the pot amid a looming occurrence of the El Niño this year may be unlikely as global rice stocks are ample, according to the Food and Agriculture Organization.

The FAO said in its latest Asia Pacific Food Price and Policy Monitor report that an “abundant” supply of the staple grain could counterbalance an upward pressure on prices caused by the weather phenomenon.

In the Philippines, weather experts and agricultural offices said the effects of El Niño, which causes droughts and floods that take a toll on food production, might not be felt until the fourth quarter this year and could affect the first rice crop of 2015.

According to the FAO, some estimates put El Niño-caused damage to agriculture at $45 billion in 1998. Most recently, in 2009, the phenomenon led to droughts and floods across several continents.

The United Nations agency observed that the likelihood of an occurrence this year has caused concern among commodities traders.

In Australia, prices of sugar, coffee and wheat are deemed most vulnerable to price volatility. In India, the threat of El Niño has also dampened confidence about the government’s ability to contain inflation within manageable levels.

“Some countries are better prepared for the effects of El Niño than others, with some, such as the Philippines and Indonesia, implementing action plans,” the FAO report said.

Philippine agricultural officials are pushing for a P1.6-billion effort that includes cloud-seeding operations for watersheds and farming communities as well as the construction of small-scale irrigation systems.

The FAO expects the El Niño to bring back Thailand as the world’s top rice exporter considering that it has massive stockpiles while current leader India usually experiences drought during the phenomenon.

Other rice-producing countries also have abundant stocks to make up for shortages resulting from El Niño, the FAO said.

In a separate report issued in April, the FAO forecast that Philippine output of milled rice would grow by 2 percent year on year to 12.6 million tons in the crop year that covers July 2014 to June 2015.

However, this is based on the assumption “that growing conditions remain normal and on expectations that farmers will continue to react to strong domestic prices by expanding plantings.”