After three years of worsening western drought and intensifying east coast hurricanes, La Nina is over, NOAA declared on Thursday. The cyclic cooling of the Pacific is forecast to give way to its better known counterpart El Niño later this year. This not only has consequences for global weather in general but also U.S. agriculture in particular. “If the globe jumps into El Niño it means more rain for the Midwestern corn belt and grains in general and could be beneficial,” reports the Associated Press’ Seth Borenstein, attributing this observation to Climate Alpha’s chief scientific officer Michael Ferrari, who expands upon this comment below:
“I’ll preface this by saying no two ENSO [El Niño Southern Oscillation] events are ever alike, but there are some things we can expect and start to monitor. “A positive phase ENSO will typically produce more precipitation in the western corn belt states, and may extend westward. Warmer surface waters leading to higher convective activity — and a more active jet stream — will increase the flow of moisture from the Pacific into the central U.S.
“So, this is favorable outlook for grains and oilseeds. But there is some risk to milk production. High daytime temperatures impact the physiology of dairy cows, particularly in regions where grazing is standard. As food prices are already high, this may play a factor in extending food price inflation.
“More important, these impacts can’t be viewed in isolation. As global supply-and-demand drives prices in most markets, global dynamics will be important. Corn stocks are at their lowest in a decade. Soybeans are at their lowest levels since 2014. Even with higher U.S. yields, low supplies elsewhere can still put upward pressure on prices. Add to that the potential for elevated oil prices — which will make corn ethanol more attractive — and we may see even more pressure on the markets.
“Needless to say, this will be a very interesting year.”
Dr. Ferrari’s efforts to model these complexities are at the core of Climate Alpha’s abilities to price the climate risk-adjusted valuation of American and Canadian cropland out to 2040. Reach out to our team to sign up for a free account and explore your own scenarios for the future of agricultural production.