El Nino math model predicts flood, then drought in Midwest Weather phenomenon gives willies to farmers, brokers, insurance agents


ST. PAUL, Minn. -- El Nino, the abnormal warming of the Pacific waters stretching from the equator up to Oregon, is going to come with a cost.

It's already affecting weather conditions worldwide, and that's making some people nervous. From agriculture to petroleum, capital markets to insurance, the economic consequences from El Nino soon will be evident in the upper Midwest.

"The name El Nino fans the flames of uncertainty, and that always has an impact in markets," said Helen Pound, a commodities analyst and trader in Minneapolis.

Mathematical models of weather probabilities show the upper Midwest at risk for spring floods, which could be followed by a crop-threatening drought in the summer of either 1998 or 1999.

"It does sound strange, but tell the Red River Valley to get flood insurance again for next spring," said Dave Mulla, a scientist with the Department of Soil, Water and Climate at the University of Minnesota. "Then, they can start worrying about drought."

Indeed, international agencies are forecasting drought conditions across large areas of the globe, based on historical data. This can raise world grain and oilseed prices for American farmers and lead to greater sales for exporting companies.

While this may help American farmers sell this year's crops, by summer the dryness will likely hit the Central Plains. After past El Ninos, drought has covered the breadbasket areas from the Rocky Mountains to Ohio and Michigan and has reached as far as the coastal Southeast.

Farm prices can again soar if such a drought hits. But farmers who produce small crops aren't in position to reap benefits from the higher market prices.

"We'll soon see some concern about El Nino and a summer drought showing up in distant futures prices," said Kent Beadle, a grain market analyst with the Country Hedging commodities brokerage in St. Paul.

Then again, it may not. A delayed drought might be another year off, Beadle said. "The severity and the duration are both important variables with El Ninos," he said.

The National Weather Service currently projects that El Nino will reach into next year, at least until March or April.

This is expected to bring heavier-than-normal winter rains to California, which worries the insurance industry.

It's also expected to produce a wetter-than-normal November and December in much of the Northern states and Canadian provinces.

The forecast then calls for a warmer- and drier-than-normal January and February before winter closes with heavy snowfalls again toward spring.

This should mean residents of the frigid North will buy less heating oil this winter, said Beadle. Commodity markets don't reveal much optimism that consumers will get a break, however.

Petroleum prices are rising as the world frets about a possible Iran-Iraq war or possible U.S. sanctions against Iraq. Political instability raises more market questions about supplies than weather raises about oil demand.

Meanwhile, heavy snow forecasts result in good business forecasts for Toro and other snow-removal equipment makers. They also warn flood-prone areas along the Red, Minnesota and Mississippi rivers to be prepared for spring flooding, said Mulla.

"The snowpack forecast doesn't bode well for flooding next spring," he said, noting that the Red River Valley has gone through previous multiyear flooding cycles going back into the 1800s.

When and if the Midwestern drought does come, farm income and agricultural support industries will be affected.

Mulla noted that the average Minnesota farm currently produces corn averaging 125 bushels on non-irrigated farmland. In 1988, a drought year after a previous El Nino cycle, the Minnesota average yield was 74 bushels an acre. In 1993, a flood year when fields were too wet to allow timely planting, the yield averaged 70 bushels an acre.

"In the extremes of wet and dry, we lose about 50 bushels an acre," Mulla said. In a state that usually produces about 1 billion bushels of corn, the losses mount up on the local economy. The U.S. Department of Agriculture estimates that corn and soybean losses in the Midwest totaled $12 billion in 1993.

Pub Date: 10/12/97

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