A significant surge in the prices of commodities affected by El Niño in 2023 is poised to have repercussions on consumers in the coming months, warns a specialist food and agribusiness bank.
Soft commodities, including orange juice, cocoa, coffee, and sugar, have witnessed substantial gains throughout the year due to extreme weather events and supply concerns associated with El Niño.
Carlos Mera, Head of Agri Commodities Market Research at Rabobank, notes that El Niño, often referred to as having a “sweet tooth” impacting sugar worldwide, has already influenced sugar prices passed on to consumers. However, Mera anticipates a substantial increase in retail-level chocolate prices, particularly due to El Niño’s effects.
El Niño, a climate pattern marked by a rise of 0.5 degrees Celsius in sea temperatures in the eastern Pacific, returned earlier this year. It can lead to heightened storm activity and droughts.
While the peak impact of El Niño tends to occur in December, its consequences take time to disseminate globally. Analysts predict that 2024 could be the year humanity surpasses critical warming thresholds due to the lagged effect.
Rabobank’s annual outlook for 2024 suggests that El Niño-related dryness in Southeast Asia, India, Australia, and parts of Africa has supported a rally in soft commodity prices. The bank expects global food price inflation to decrease significantly after years of soaring prices.
Despite the overall decline in inflation, Rabobank warns that certain crops could be adversely affected by El Niño in early 2024. However, there is potential for some crops, particularly in the United States, southern Brazil, and Argentina, to benefit from the phenomenon.
In 2023, orange juice futures surged by 80%, reaching an all-time high in November due to hurricanes and disease impacting citrus crops in Florida. Cocoa prices, a crucial ingredient for chocolate, rose by 64%, reaching 46-year highs as West African supplies were affected by heavy rains and fungal disease.
The robusta coffee variety hit its highest level in 15 years on December 15, while sugar prices, despite a slight decline from a 12-year peak in September, have risen by 13% in 2023.
Rabobank’s Mera emphasizes the clear relationship between El Niño and higher sugar prices, particularly affecting major exporting countries such as Thailand, India, and Australia. While the impact of El Niño on cocoa is expected to be weaker, Mera notes that the cocoa industry’s forward-selling practices mean higher chocolate prices may not be immediately felt by consumers but are likely to materialize in 2024.
