boy-corn-sugar-supply-scenario

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By: Sakthi Prasad --

09 July, 2014

boy-corn-sugar-supply-scenario
BLOG

With inputs from Ambika B and Krishna Reddy

The El Nino weather phenomenon forms every two to seven years and is known to disrupt normal weather patterns in Asia Pacific and Latin America regions.

El Nino, a warming of the surface of the tropical Pacific Ocean that can trigger downpours or droughts around the globe, has been worrying agro producers and consumers alike ever since news was out that the phenomenon would be strong this year.

The two most populated regions in the world to be affected by El Nino (means "The boy" in Spanish) are India and Brazil; and to some extent the United States. Let us look at what happens to the yields of corn and sugar -- two of the most important crops in the world of agriculture.

India and Brazil are top producers of Sugarcane.  U.S. of course is the biggest producer of corn, while Brazil stands third and India eighth.

The produce of these two crops go into multiple industries in variety of forms and hence category managers naturally worry about any potential disruption to production and supply.

Yield is one of the best ways to measure crop output.

Now the question is what happens to the yields of corn and sugarcane during an El Nino year?

There have been seven instances of El Nino in the last two decades with the years 1997-1998 being one of the strongest in recent times.

The U.S. corn yield was negative thrice and was flat once, while the Brazilian yields went up six times. This show El Nino didn't have much of an impact on U.S. and Brazil corn yields over a period of time.

However, the scene is different for Indian corn yields. The country's corn sector experienced negative yields five times with one year being flat.

The point to be noted is that India usually experiences less than average rainfall during El Nino years whereas Brazil enjoys copious rainfall.

And since corn is a rain fed crop, copious rainfall in Brazil helps corn production; while less than average rainfall in India results in negative corn yields compared to the previous year.

Corn of course is grown around the world. And what happens to the worldwide corn yield during El Nino years? Toshichika Iizumi of Japan's National Institute for Agro-Environmental Sciences said in a study published early in July that worldwide corn yields fell 2.3 percent in El Nino years compared to normal in 1984-2004. (http://www.trust.org/item/20140515085930-rnki5)

In fact, lizumi study shows that corn yields suffered in the southeastern United States during an El Nino year, but rose in Brazil and Argentina.

CORN YIELDS (GREY STRIPS INDICATE EL NINO YEARS)

CORN YIELDS (GREY STRIPS INDICATE EL NINO YEARS)

 

DATA SOURCE FOR CHART: U.S. DEPARTMENT OF AGRICULTURE (USFDA)

 

SUGARCANE

India and Brazil are the top two producers of sugar.

Sugarcane is a water-intensive crop. Lack of adequate supplies of water will affect the production as the crop relies on extensive irrigation system all through its production cycle.

Yield data suggests that Brazilian sugarcane yields are not negatively impacted by El Nino. In fact, of seven El Nino occurrences, only in 2004-05 the yields were negative. This is because plentiful rainfall during El Nino years in a way helps Brazilian sugarcane crop as the irrigation network gets a fillip from additional water.

The Indian sugarcane yields have been reported to be lower during El Nino occurrences.  An increase in irrigation infrastructure has however cushioned the impact of inadequate rains -- especially during 1994-95 and 200607. The cyclical nature of sugarcane production also lowers the impact of El Nino during its occurrence. For example, there might be lower impact on the yield in 2014-2015 as the cane crop that comes due for harvest was planted in 2013 -- a year of normal rainfall.

SUGARCANE YIELDS (GREY STRIPS INDICATE EL NINO YEARS)

SUGARCANE YIELDS (GREY STRIPS INDICATE EL NINO YEARS)

 

DATA SOURCE FOR CHART: FAOSTAT

CONCLUSION

It is tricky to establish a direct correlation between El Nino and crop yields as multiple factors go into determining the crop output. However, if past patterns are of any indication, then one could reasonably expect that the current year's corn and sugarcane yields will follow the same pattern as observed in previous El Nino years.




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