Weather and Natural Disasters

El Nino winners and losers around the world

It's 95 percent certain that El Nino will last through the winter in the northern hemisphere, the U.S. Climate Prediction Center warned last month.

The wild weather phenomenon occurs every few years and is caused by the warming of certain parts of the Pacific Ocean. It can have dramatic and varied effects on weather across the world and this season's installment is forecast to be particularly strong. Europe, for instance, is expected to suffer heavy snow and particularly cold weather through winter.

CNBC takes a look at industries and countries across the globe that could be most affected.

A father with his children walk over the cracked soil of a 1.5 hectare dried up fishery at the Novaleta town in Cavite province, south of Manila. The drought-inducing El Nino weather phenomenon continue to affect farmlands in the provinces resulting to more damaged crops.
Romeo Ranoco | Reuters


El Nino is likely to lead to a rise in prices for coffee, rice, sugar and cocoa, as crops in tropical regions may be hit by flooding or drought, economists at BNP Paribas predict.

Some agricultural futures have already rallied off lows, partially as a result of fears of weather-related supply shortages.

Prices for sugar for March delivery are up nearly 50 percent since a low point in August and cocoa for December delivery has risen by around 13 percent in the same period.

So the weather phenomenon could prove good news for farmers whose production is unaffected — but there are plenty who are vulnerable all over the world. These range from palm olive producers in Indonesia to sugar growers in China, India and Brazil. Indeed, the Latin American country is already suffering from slowing harvesting and reduced sugar levels that can be extracted from cane.

Countries reliant on agriculture, such as some in sub-Saharan Africa, could be particularly hard hit.

Yvonne Mhango, an economist at Renaissance Capital, warned of the possible impact on Kenya if the upcoming El Nino proves as severe as the one in 1997-1998. Partly as a result, Kenya's economic growth fell to 0.5 percent in 1997 from 4.1 percent in 1996.

"If the developing El Nino event turns out to be as powerful, agriculture and transportation, which account for around 30 percent of GDP, would be among the hardest hit sectors. Crops would be washed away or damaged by excess moisture. Transportation and trade would be disrupted by roads and bridges that have been washed away, and construction activity would slow, as projects are halted owing to flooding," Mhango said in a report.

European Central Bank

As the euro zone's central bank toils to push inflation towards the targeted "close to" 2 percent, a little help may arrive via the weather. That's because heavy snow and cold temperatures could provide a small boost to prices, according to BNP Paribas.

"Past evidence suggests that El Nino has a marginal effect on euro zone inflation — around a 0.1 percentage point increase in the annual headline rate — mainly by way of higher seasonal food prices," Gizem Kara and Stefan Ubovic, economists at BNP Paribas, said.

El Nino is associated, at least in Europe, with higher prices for seasonal foods such as fish, fruit and vegetables, plus meat. That's even allowing for the general increases in seasonal food prices associated with the winter months.

"The harsher winters, they take a toll on seasonal crops and cause disruption to transportation. As some food items are inputs into products such as animal feed, we generally see livestock prices increasing, too," Kara and Ubovic said.

Countries outside of Europe might also see inflation rise, including the Philippines and other major agricultural producers. While that could be good for the Philippines, where inflation remained at 0.4 percent year-on-year in October, the effect would be less positive for those like Brazil and Colombia that are grappling to control price rises.

"Most of the pressures (in Colombia) over the last few months have been driven by food prices, related to the strongest El Nino since 1997-1998. This likely will push food prices up further if it does not recede soon. This seems unlikely," Andres Abadia, senior economist at Pantheon Macroeconomics, said in a report this week.

New York's Times Square on Tuesday.
Too hot to work? Maybe in 30 years’ time
Here’s how natural disasters can hit a country’s ratings: S&P

Construction industry

It's not all good news for the euro zone, as the harsher weather associated with El Nino in Europe tends to knock construction activity, said Kara and Ubovic. The economists forecast that the hit to construction would knock 0.1 percentage points off euro zone economic growth in the first three months of 2016, quarter-on-quarter.

Germany, in particular, could be hard hit, because its construction industry accounts for a significant 9 percent of its gross domestic product (GDP). As a result, it could see 0.3 percentage points knocked from first quarter GDP, according to BNP Paribas.

Kara and Ubovic saw construction as the most vulnerable industry in Europe, but warned of other potential economic dangers.

"Harsh weather conditions could prompt consumers to stay at home, rather than go out and spend, especially in countries less accustomed to heavy snowfall. Although the impact is likely to be seen mainly in Q1, we cannot rule out a front-loaded negative impact in Q4 if the weather turns early, which could upset Christmas shopping patterns. Potential disruptions to transportation could also weigh on the manufacturing sector," they said.

Ski resorts

Autumn can be a tense time in ski resorts, as local businesses await the first dump of snow to kick start the ski season and bring in hordes of visitors. But El Nino has proved good for businesses in Mammoth Mountain, whose ski area opened a week early on Thursday because of the already-heavy snow fall.

Ski resorts snowfall

"If you haven't heard, El Nino is expected to drop a lot of snow on Mammoth Mountain this winter. The return of El Nino continues to strengthen and forecasters are expecting the event to peak in the next few months," a blog post on said this week.

— By CNBC's Katy Barnato. Follow her on Twitter @KatyBarnato.