Industry Trend Analysis - El Nino Threat Returns To Southern Africa - MAY 2017

BMI View : The potential return of El Ni n o at the end of 2017 poses downside risks to our Africa grain production forecasts, especially in Southern Africa. Intermittent droughts in the region have meant that food security in some areas is already precarious and we highlight Zambia, Mozambique and Tanzania as particularly exposed to this threat .

The return of El Nino by the end of 2017 is a looming possibility and Southern Africa would be especially affected by its re-emergence. In its last occurrence in late-2015, the El Nino weather pattern, which is caused by warming Pacific Ocean temperatures and usually brings dry weather to South East Africa, led to reduced sugar and corn production in South Africa and Zambia, the region's two main corn exporters ( see 'Droughts To Lower Production Until El Nino Disappears ' , October 1 2015). Although production has recovered well in both countries since 2016, strong export demand (related to droughts elsewhere in East Africa) has kept local grain prices elevated. Indeed, corn prices in several key markets such as Kenya and Ethiopia are now near multi-year highs.

The Southern African 2016/17 harvests, which are currently either ongoing or complete, will be spared any El Nino effect as the pattern will most likely only start to affect the region from H217. Moreover, with the exception of Tanzania, most Southern African soil is facing limited stress. However, the re-emergence of El Nino will negatively affect the 2017/18 crops, which are planted in early 2018 and harvested in Q218. In some cases, such as Botswana, countries in Southern Africa have not recovered from the previous bout of El Nino and will thus face considerable downside risks to our view of a production recovery in 2017/18.

Prices Elevated In Key Markets
Select Prices - SSA Regional Maize Average (USD/kg) & Morocco Soft Wheat, MAD/kg (LHS)
Note: Regional maize average includes Zambia, Burundi, South Africa, Kenya, Ethiopia and Tanzania. Source: BMI, FAO

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