Last week, the Japan Meteorological Agency joined the US Climate Prediction Center and the Australia Bureau of Meteorology in predicting an increased chance of the development of the El Nino (Spanish for ‘baby Jesus’) weather pattern this summer. El Nino—short for El Nino Southern Oscillation or ENSO—refers to variations in the temperature of the surface of the tropical eastern Pacific Ocean (warming and cooling known as El Nino and La Niña respectively) and in air surface pressure in the tropical western Pacific. The pattern typically brings below-average rainfall for the Asia Pacific region, threatening the yields of agricultural crops, while the US is often hit by wetter-than- average weather.

Prior to 1980s and 1990s, strong El Nino events occurred on an average every 10-20 years. In the early 1980s, the first of a series of strong events developed. The El Nino of 1982-83 brought extreme warming to the equatorial Pacific. Surface sea temperatures in some regions of the Pacific Ocean rose by 6 degree Celsius above normal. The warmer waters had a devastating effect on marine life existing off the coast of Peru and Ecuador. Fish catches off the coast of South America were 50% lower than the previous year. Severe droughts occurred in Australia, Indonesia, India and southern Africa. Dry conditions in Australia resulted in severe losses in crops and millions of cattle died from lack of water. Heavy rains were experienced in California, Ecuador and the Gulf of Mexico.

A similar year may be brewing now.

Roughly 55% of India’s arable land is rain-fed and annual economic prospects are inexorably linked to the quantity and distribution of rainfall. Research on the impact of El Nino on annual foodgrain production in India points to a decline of between 6% and 10%. Of course, El Nino is not the only factor that influences the monsoon in India, but it is an important one in which major prediction strides have been made during the last decade. In collaboration with international weather agencies it is time that India develops a systematic ENSO grading system. Similar to storm prediction, the grades will go from alert to watch to warning to threat. As each grade is triggered, steps should be put in place to mitigate its rather profound effects on the Indian (agricultural) economy.

In India, El Nino tends to affect areas that depend on the Southwest monsoon but has been empirically observed to coexist with higher-than-average Northeast monsoon levels. This suggests a careful crop-planting model. Some ideas are to advocate intercropping systems with long duration base crop and medium to short duration companion crop in mono cropped areas; practice moisture conservation and judicious use of fertilizers in double cropped areas during rabi season; cultivate rice (a water intensive crop) using rice intensification (SRI) method during kharif season; and practice moisture conservation with cash crops such as mango, cashew and coconut that are dependent on pre-monsoon rain that is often deficient in El Nino years.

Crop planting is one way to plan for an “El Nino" year. Another way is to manage current and forward foodgrain stocks (and attendant prices). India had bumper foodgrain production in 2011-12 with (revised) estimates suggesting a production of 252 million tonnes. Some 10-15% of this is expected to rot for want of storage facilities. The Union ministry of agriculture has released positive projections for this year that may not transpire if El Nino arrives. India is generally self-sufficient in wheat and rice but may well end up significantly deficient in pulses for this year. The Indian government should sell spot wheat and rice in international markets and hedge the forward price of pulses using hedging instruments in the international commodity markets.

El Nino may or may not arrive this year, though the odds are increasingly looking like it will. If it does, it will affect rainfall, food production and food prices to some degree. It will be ill-timed for India and will force us to once again deal with volatile and rising food prices. Monetary policy will have no choice but to respond to increasing prices particularly if it translates to increasing inflation expectations.

Some timely action can yet mitigate the pain.

P.S: “I am the daughter of Earth and Water

And the nursling of the Sky;

I pass through the pores of the ocean and shores

I change, but I cannot die." P.B. Shelley in The Cloud.

Narayan Ramachandran is an investor and entrepreneur based in Bangalore. He writes on the interaction between society, government and markets. Comments are welcome at narayan@livemint.com

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