New El Nino brings risk factor to farm output

El Nino typically increases the likelihood of drought in the east of New Zealand. Photo / NZME.

The El Nino weather pattern that meteorological forecasters are predicting this year is likely to reduce New Zealand's agricultural output, say Bank of New Zealand economists.

Historic data compiled by BNZ suggests a correlation between New Zealand's agricultural growth and the Southern Oscillation Index, a standardised index of sea-level pressure differences between Tahiti and Darwin that is used to determine whether El Nino or La Nina is present.

The index fell below 15 this month, a level that indicates the coming of El Nino. The Australian Bureau of Meteorology has confirmed the Pacific Ocean has officially entered into an El Nino pattern that has a 70 per cent chance to last through the southern winter and spring.

El Nino typically increases the likelihood of drought in the east of New Zealand as a result of the strong, frequent winds it brings from the west and southwest, BNZ said.

Coinciding with that in the past was the rise of livestock slaughter as dry conditions put pressure on the supply of feed.

That also tends to restrict milk production growth in general, while not reversing the trend.

Previous periods of El Nino have resulted in "modest declines in New Zealand's agriculture GDP".

But BNZ remains cautious about giving any El Nino-affected price predictions given the amount of variables in the equation. Lamb prices did tend to fall in previous El Nino seasons, but other variables include supply from rival producers in Australia, inventory levels in export markets, and the exchange rate.

El Nino is typically followed by its La Nina opposite, which can also weigh on agricultural production, BNZ says.