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19 September 1997
Article for the NZ Farmer by Chris Ward, Senior Policy Analyst with MAF Policy
There is little debate that we are in an El Nino weather phase. Whilst the actual Southern Oscillation Index is of varying negative intensity from month to month the sea temperature off the Coast of Peru is running at 5 degrees centigrade higher and it is this phenomenon which has the influence on the weather.
Debate will continue on the likely agricultural impact of El Nino. Will it be similar in severity in terms of lack of rain and warm hot winds to the 82/83 El Nino drought on the East Coast of both Islands. In looking at past El Ninos the more negative the index is not a predictor of a worse affect on agriculture. For instance the 1986/87 El Nino had more of an influence on dairying in the Waikato and Taranaki than the more negative indexed 1982/83 affect. Dairy production was estimated to be 10% down in these regions in 1986/87 but only 3% down in 1982/83.
The best potential parallel for likely impacts this time is perhaps the 1982/83 El Nino impact.
The differences this time are:
We estimate that the potential detrimental impacts of droughts on the East Coast and possible Northland regions are unlikely to be fully compensated by positive affects due to increased rainfall on the West Coast.
We have also assumed that product prices will not change in the event of reduced supply. This we think is reasonable for some preliminary ballpark figures, but we would hope and trust that exporters would make the most of any perceived supply shortages amongst importers.
Not as much transporting of stock to areas which have feed occurs as might be expected. Farmers in areas with feed usually prefer to purchase store stock to finish themselves, finances permitting.
In arriving at a cost at the farm gate we looked at the estimates of regional costsfrom past drought periods (which incidently weren’t all El Nino related). For instance in 1990 the effects of the East Coast drought and its flow on affects 1988/89 and 1990 were estimated at $365 million (farm gate costs)
We have looked at past product production statistics and categorised these as to the weather pattern at the time and taken on board the differences as outlined above.
Just as predicting the weather is an inexact science so to is predicting the impact. From the above estimate we derived our range of $300 to $500 million. To put this is perspective it is approximately 3 to 5% of total farm gate returns which in turn make up 5% of GDP.
At FOB prices Agriculture however forms about 15% of GDP. We have not attempted yet to estimate the impact to downstream industries.