El Nino weather menace looms for frail economies

By Rene Pastor

NEW YORK (Reuters) - A nascent El Nino weather cycle threatens to wreak more economic havoc and disrupt raw material production across a wide swath of the world, evoking memories of the killer edition of 1998.

The timing could not be worse. This El Nino appears to be developing as the world is struggling to emerge from the worst economic conditions since the Great Depression. Eleven years ago, a damaging El Nino occurred in the middle of the Asian financial crisis which roiled financial markets.

"El Nino is a little bit like recession: you are in it before you can say you have one. If it continues as it is now, the historians will say the El Nino started in May," said David Jones, head of climate analysis in Australia's Bureau of Meteorology. Jones said they could declare an El Nino in weeks.

During El Nino, an abnormal warming of the waters of the equatorial Pacific unhinges weather patterns in the Asia-Pacific region and beyond. A La Nina weather pattern, in which waters cool, was in place last year.

In 1998, El Nino-related storms, floods, tornadoes and mudslides killed more than 2,000 people and caused billions of dollars in damage to crops, infrastructure and mines.

Michelle L'Heureux, head of the U.S. Climate Prediction Center which tracks El Nino, said this version may not approach the one in 1998, the strongest weather anomaly in 150 years. The CPC is an office under the U.S. National Oceanic Atmospheric Administration.

If the anomaly does recur with severity, drought in Asia could lift grain prices, which are already near historic levels due to supply shortages, while storms that would disrupt crude production in the Gulf of Mexico may be minimized.

Mike Palmerino, U.S. agricultural meteorologist with DTN Meteorlogix, added: "This one has a little more going for it. But a year ago at this time it looked like we were building toward an El Nino and everything just totally fell apart toward the end of the summer, where all the Pacific circulation patterns changed and we actually slipped back into a La Nina."

COMMODITIES WEATHER WATCH

Some forecasters fret that an early sign of this El Nino is the weak annual monsoon plaguing India, one of the world's biggest producers and consumers of everything from sugar to soybeans.

The monsoon rains are the lifeblood for farmers in India. Its faltering sugar crop is a prime reason why sugar prices are at their highest levels in three years.

China typically turns to South America for soybeans during the U.S. growing season. But the 2009 crops from Brazil and Argentina are suffering from drought and U.S. soybean stocks are at a 32-year low -- less than two weeks of normal commercial supply.

Shawn McCambridge, grains analyst with Prudential Bache Commodities in Chicago, said the El Nino could "dry out the second half of 2009 in Australia and it can also affect South American production.

"It's developing a little too late to really have much of an impact on the Northern Hemisphere, but the concern would be in the Southern Hemisphere (crops)," he said.

Indonesia, one of the biggest producers of palm oil and a large consumer of sugar and rice, faces drought.