The 2009 El Nino is developing as the world struggles to emerge from the worst economic conditions since the Great Depression of 1929.

INDIA NEEDS RAIN

El Nino, meaning "little boy" in Spanish, is driven by an abnormal warming of the eastern Pacific Ocean and creates havoc in weather patterns across the Asia-Pacific region.

It is associated with drought conditions in parts of Australia and Asia and wetter-than-normal weather in parts of South America.

"Most of the indicators show an El Nino is developing in the Pacific. I would not say it is accelerating, but it's definitely increased," Watkins said.

"The warm sea surface temperatures and the warm ocean temperatures, looking at them instantaneously, if you arrived from the Moon you'd probably say that looks like an El Nino," he said.

"I guess we are going fairly close to saying it is an El Nino, but you have to be a little cautious because an El Nino is a longer timeframe thing."

The Southern Oscillation Index (SOI), a key factor in an El Nino and calculated from monthly and seasonal fluctuations in air pressure between Tahiti and Darwin, eased in June to negative 2 from a negative 5 in May.

Malaysian crude palm oil futures dropped as much as 1.7 percent to touch a new 3-month low on Tuesday after news of the indicator easing, with the market viewing signs of a weaker El Nino as positive for the prospects of higher production.

Indonesia, one of the biggest producers of palm oil, is already facing drought.

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