El Niño threatens global food prices and Australian economy

The El Niño weather phenomenon is expected to impact global food prices and regional economies. In Australia, Commonwealth Bank analysis suggests the phenomenon could cost the economy approximately $13.4 billion over the next two years, potentially reducing GDP by 0.45 percentage points.

Australian farmers are responding to drier conditions by shifting toward less water-intensive crops like wheat and barley, moving away from more lucrative options such as canola and chickpeas. While the current harvest remains relatively strong, experts warn that if moisture reserves deplete, the 2027 crop could face severe impacts. Livestock producers are also thinning herds, increasing their reliance on the wheat market.

On a broader scale, El Niño is projected to drive up the costs of various consumer goods. Potential price increases are expected for coffee, cocoa, and seafood due to changing ocean temperatures and weather disruptions in major producing regions. Additionally, extreme weather affecting animal feed crops could indirectly raise the prices of beef and pork.