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June 30, 2023

El Niño Raises Risk of Decreasing Agricultural Productivity in Southeast Asia

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June 30, 2023

According to the Singapore Institute of International Affairs, southern Southeast Asian countries such as Singapore, Indonesia, and Malaysia, may witness the most severe drought conditions in the past five years due to an anticipated El Niño. The resulting hot and dry weather is expecting to heighten the risk of forest fires and drought, adversely impacting crop production and leading to higher food prices throughout Southeast Asia.

This year’s wave of El Niño is expected to bring varied economic consequences to the region. The Philippines, for instance, may experience a loss of 0.3% in annual GDP growth. A long period of hot weather also disrupts global palm oil supplies. Malaysia and Indonesia, two countries accounting for 85% of the world’s palm oil production, have witnessed prolonged droughts in recent months. With Malaysia experiencing 40% reduction in rainfall, palm oil price may rise in the second half of the year. Similarly, Thailand, a leading exporter of sugar, may also witness decreased output as a result of El Niño. 

Despite challenges posed by El Niño, there are many opportunities for cooperation with Southeast Asian countries to mitigates its effects. As droughts may intensify, there will be a growing demand for agrotechnological solutions such as water desalination, drought-resistant crops, and rainwater harvesting. US businesses can introduce these technologies to farming businesses in Southeast Asia, facilitating their adaptation to the impacts of El Niño. 

Interestingly, while El Niño is expected to severely affect Southeast Asia agriculture, it may present an opportunity for US farming exports. Increased rainfall in the summer may alleviate the impact of severe drought in the US and boost output of key commodities such as corn and soybeans. An increase in productivity can be an opportunity for US exports of agricultural products to Southeast Asia, where food demand is poised to exceeds supply due to low crop production.

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