Outlook for El Niño causes concern about ’16 crops

by Josh Sosland
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While it may be difficult to attribute any of the present global weather patterns to the impact of this year’s predicted El Niño effect, several observers recently have had little or no problem in fretting about the likely negative result they are forecasting this weather phenomenon will exert on 2016 harvests of wheat, corn and rice. Nearly a decade has passed since the last severe El Niño impacted crops in 2006-07. The current worriers on this score delight in pointing out that this prior El Niño led to a period of dramatic crop price escalation, including a 300% increase in wheat.

Forecasts of a repeat performance from this year’s emerging weather patterns rely primarily on forecasts that warmer Pacific Ocean water may exert a more dramatic effect this winter than is indicated by the preliminary 2016 planting and yield forecasts. Many of the latter now point to slight reductions in plantings of wheat and corn, which has been interpreted as much less of a bullish influence than is indicated by current supply prospects.

Examining the potential impact of a serious crop reduction has resulted in the current markets, with major crop prices well below a year earlier, being cited as extremely favorable for consumer food manufacturers. Financial reports have not been universally favorable in measuring up to that positive assessment, indicating that any increase in margins from lower ingredient prices are currently offset by a combination of competitive retail business and shifts in consumer preferences.

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