How EL Nino is Impacting the World Economy

The El Nino-La Nina cycle is a naturally occurring phenomena- resulting from interactions between the ocean surface and atmosphere over the tropical Pacific- that been going on for hundreds of years, with episodes happening roughly every 2 to 7 years. The El Nino and La Nina patterns are opposing climate cycles in the Pacific Ocean. However, with rising surface temperatures in the sea, the effects of El Nino are beginning to compound.

El Nino can impact multiple different aspects of the ecosystem and world economy through floods, droughts, and marine populations. Losses are projected to cost trillions of dollars. 

In the last half decade, the world has experienced two major El Nino events, which resulted in losses of $4.1 and $5.7 trillion in the global economy. Unfortunately, most of the economic impact is on the world’s poorest countries. According to a Dartmouth study, an economic downturn following an El Nino event could last more than 14 years, slowing or delaying growth for 5 years. According to this study, El Nino is the most important source in year-to-year climate variation, altering world wide weather patterns which impacts various countries' economies. In 2003, following an El Nino event, many coastal countries' economies were lowered by more than 10%. 

One example of the potential impact of an El Nino event is the threat to cocoa producers. According to CNBC, there is a 71% chance there will be an intensified El Nino event through March 2024. This would significantly reduce the amount of arable land for cocoa cultivation in regions like Western Africa. This is especially worrisome, as West Africa is responsible for about three quarters of the world’s cocoa. While cocoa is essential in chocolate, it is also necessary for cocoa butter which is used in many skincare products. Cocoa farmers rely on an important optimal altitude for cocoa production.

With El Nino forcing that altitude higher, farmers will need to move to higher altitude in order to farm in more favorable conditions. Farms are also at risk of an increase in input and overhead prices that are caused by El Nino conditions. In Indonesia, higher temperatures are projected to lead to a loss of $666 per hectare. Resulting in cocoa prices already heading towards record highs. 

Sugar is another important staple product that is projected to be impacted by El Nino. As much as 15% decline in production, around 180,000 - 200,000 metric tons is projected. Even a mild case of El Nino could lead to a 5% drop in production. According to the Sugar Regulatory Administration (SRA), the sugar industry already faces a 10% decline in production due to shifting harvesting cycles. Thus, further decline in production will push sugar prices higher. 

Another impact of El Nino is the thicker top level of warm water that prevents cold water from cycling to the surface. The cold water is essential for bringing up nutrient rich water from the bottom of the ocean, which is an important food source for the bottom of the food chain. Which impacts the entire marine ecosystem, which could have dire consequences on the food security of coastal countries. 

While there are initiatives in place to help the farmers and countries most impacted by El Nino, more needs to be done. The Rainforest Alliance is one project aiming to help farmers in West Africa, with 7 million aimed at protecting farmland. However, some research indicates an annual investment rate of $536 billion is necessary to protect the world economy.