El Nino

(Elwynn) Well, we’ve just come out of the second strongest La Nina, the opposite of El Nino, that we have had in the recorded history of about 200 years. And this second strongest one brought us a disastrous drought, the drought we had in the Corn Belt in 2012. That’s the first official drought, widespread drought that we’ve had in the Corn Belt since 1988. And that’s because of that La Nina, coming out of a very strong La Nina, a pendulum when you push it way off to the left is likely to swing far to the right. And then swing quite a ways to the left again. So, we’re expecting that we are in a period of extremes or volatility, going from one extreme to the other in weather from year to year or maybe it will be more like in 18 month period to 18 month period. This strong El Nino, those give us a 70 percent chance of an above trend line yield for both corn and soybean in the Corn Belt. That means that we would have perhaps lower prices if other factors don’t come into play. And we’ll let the economists discuss that. But at least great yields to deal with. And also this can have another effect up in the wheat country of the north west. When we have record high corn yields, we don’t have record high wheat yields because they happen in different places, where the effect of El Nino is exactly the opposite. When we’ve gone through a similar situation we’ve had an El Nino last a full two years, rather than the normal 14 months, which is the average for an El Nino. So, if it goes it’s 14 months that gets us well into 2016 and off to a good start for the crop, but it could still go bad after that. In fact, like it did back in ’83. The main thing is with El Nino, we tend to have closer to average conditions rather than extremes. That is the summer is oppressively hot, when there’s an El Nino. The winter is not bitterly cold. And that is good news for people with cattle outside and people with winter wheat sticking up out of the ground. And this is a real factor because we don’t get a sudden change from La Nina to El Nino, that’s a gradual one over months, a gentle change, but when a strong El Nino ends, it can suddenly go to a La Nina condition, such as the major drought we had in 1988, began just weeks after the end of an El Nino as we went into a La Nina. So, we can suddenly shift and you have to be ready in your risk management for a sudden change. Are we going to have three years, or four years of high yield? No suddenly this is is a bad year. Or maybe it’s still going to stay a good one. After El Nino you must be ready for the yields to change quickly and accordingly, the prices of the grain to change and all the reverberations that that will have through other markets. We have a lot of history to back up this idea that we are in a pattern, that this 25 years will be highly volatile, not three years in a row of record high yields, not to say there won’t be two, but not likely three. If you’re a farmer and you can remember the ’80s and remember, what I should have done- do it this time, because it may be a repeat.

No Comments Yet.

Leave a reply

You must be logged in to post a comment.