Market News & Headlines >> India Monsoon Forecast Raises El Niño Worries

India’s government on Tuesday cut its forecast for the strength of this year’s monsoon rains due to the presence of the El Niño weather phenomenon, stoking market concerns about El Niño’s potential impact on crop production in South Asia.  

This year’s June-September monsoon rains are now forecast to total 88% of the long-term average, earth sciences minister Harsh Vardhan said. In April, India forecast the monsoon at 93% of the 50-year average. Anything below 90% of normal rainfall is considered a drought by the government, but the forecast has an error margin of 4 percentage points up or down.

The arrival of this year’s monsoon season has already been delayed, with rains expected to hit India’s southern coast of Kerala June 4 or 5, compared to the normal date of May 30.

Weather forecasters say the ultimate impact of El Niño on rainfall for India and the rest of South Asia depends heavily on the strength of this El Niño event. So far, this is a weak El Niño event that could have a limited impact. Most computer models signal it will strengthen into at least a moderate event, but it has actually weakened recently.

El Niño concerns have likely been most evident in vegetable oil futures, due to a trend for the event to mean lower Asian palm oil production. Palm oil output has been down from the previous year in 7 of the past 10 El Niño years.