The effects of El Nino on crop prices, production

The prospect of a Super El Nino on the horizon has figured prominently in the media, but its impact on farmers depends on which side of the world they live.

As the harvest equipment starts chewing through the first fields of the season here, the phenomenon ranks low on farmers’ worry list.

If anything, warming sea-surface temperatures in the central Pacific could support higher crop prices due to its impact on production in export competitors such as Australia.

While not a key driver behind the recent rallies that have brightened the price outlook for this year’s harvest, the Super El Nino one of the underlying fundamentals that could help keep prices buoyant through the winter months, says Bruce Burnett, a weather and markets analyst with Glacier Farm Media.

A price snapshot put together by provincial economists in late July shows the price farmers could get for new crop wheat delivered into the system this fall is up 16 per cent over a year ago. Canola prices are up 26 per cent and soybeans by 17 per cent.

A far bigger influence on markets of late is the state of the crop in other producing regions, conflict in the Middle East and the Russia-Ukraine war.

Provincial economist Darren Bond says that while it’s risky to assume recent patterns will continue, it appears recent rallies are tied to the status of tensions in the Middle East and lower production in the U.S.

He’s watched this year as prices have briefly rallied in reaction to an escalation in military conflicts followed by two to three months of prices many sellers find “uninteresting,” he said.

Bond encourages farmers to know their own costs of production so they can pounce on short rallies that offer prices that guarantee them a profit, rather than give into the urge to hold out in case the market goes higher.

“There’s an old saying in farm management: no one has ever lost the farm selling at a profit,” he told farmers on a recent webinar.

Where El Nino factors into the production equation for Prairie farmers is the prospect of a warmer, drier winter, which sets the stage for moisture concerns heading into next year’s growing season.

However, its impact on farmers in parts of the world where farming is less about income and more about having enough to eat could be catastrophic.

While El Nino is a naturally occurring phenomena, observers say the warming climate is amplifying its effects. This El Nino is forecast to be the most powerful on record.

A new report by the World Food Program warns that as it peaks between September and December this year, this El Nino will push an additional 49 million people into acute food insecurity in Latin America, the Caribbean, Africa, Asia and the Pacific.

“This latest El Nino is also unfolding at a time when food systems are already under strain. High energy and fertilizer prices — linked in part to wider political pressures — are already affecting planting decisions, agricultural production and food prices. Together, these factors increase the risk that climate shocks could push more people into hunger.”

The weather extremes associated with El Nino can result in drought for some regions and severe flooding in others and in some cases both.

“These extremes damage crops, livestock and infrastructure, reducing food production and disrupting markets. As supply falls, prices rise and food becomes less affordable — especially for smallholder farmers and pastoralists who rely on rainfall. When combined with existing pressures such as conflict these climate shocks can quickly increase hunger,” the report says.

Latin America and the Caribbean nations will be among the hardest hit by drier-than-average growing conditions, with food insecurity expected to surge by nearly 50 per cent.

The effects of this are exacerbated by the fact that wealthier nations, including Canada, have substantially cut their contributions to foreign aid and development, which makes mounting a humanitarian response even harder.

It’s a sad commentary that the industrialized world, which is contributing the most to the changing climate, could now profit at the expense of those most affected.

Laura Rance-Unger is editor emeritus for Glacier FarmMedia. She can be reached at lrance@farmmedia.com