Much of the variability in Australia’s climate is connected with the atmospheric phenomenon known as the Southern Oscillation, a major see-saw of air pressure and rainfall patterns between the Australian/Indonesian region and the eastern Pacific. The Southern Oscillation gives rise to two major weather phenomena: El Niño, generally associated with dryer conditions in Australia, and its opposite twin, La Niña, generally associated with wetter conditions.
Given the challenges of accurately predicting weather conditions over the longer term, agricultural planning and decision making is usually focused on the short-term; namely the current crop or pasture growing season and periods out to a maximum of one year. These timescales are exactly those impacted by the extremes of the Southern Oscillation – La Niña and El Niño – both of which often last for about 10 -12 months, and typically have the biggest impact in the Australian winter and spring; a key period agriculturally given the primarily winter to spring growing season of the Australian Wheatbelt.
Schematic maps indicative of typical rainfall tendencies during El Niño and La Niña events
In Australia, El Niño events are often associated with severe drought conditions. Since rainfall variability is the dominant factor causing year-to-year fluctuations in Australian wheat yields, El Niño is the most significant climate phenomenon with respect to volatility in farm operating income (and hence landowner and operator risk).
The relationship between El Niño and Australian rainfall is particularly significant in eastern and southern parts of Australia. Whilst some parts of the extreme south of the western part of Australia receive below average rainfall during El Niño growing seasons, the risk of drought is higher in the eastern, southern and northern regions. The more extreme negative effect of El Niño on other parts of the Wheatbelt is the primary reason for the more reliable wheat yields achieved in the Western Australian Wheatbelt.
Average growing season rainfall anomalies (deciles) during the 12 most extreme El Niño years in the last century
In contrast to the majority of Australia, the eastern edge of the Western Australian Wheatbelt region can receive above average rainfall during the summer months in El Niño years. Whilst this can increase the risk of crop damage if excessive and persistent rainfall is received during the early summer harvest period, more often than not the effect is positive with these rains resulting in higher residual soil moisture which acts to boost yields by mitigating the risk of lower rainfall in the following growing season. This may explain the tendency of low rainfall far eastern districts in the Western Australian Wheatbelt to produce above average yields in some dryer years when higher rainfall districts to the west produce below average yields.
Average summer rainfall anomalies (deciles) during the 12 most extreme El Niño years in the last century
La Niña years occur with broadly similar frequency to El Niño. Although generally associated with increased rainfall, the effect on wheat yields can be either positive or negative depending on the extent and timing of the rainfall. If additional rainfall is experienced during the growing season this can have a positive impact on yields, however, if excessive rainfall results in waterlogging, or in extreme cases flooding, the effects can be detrimental.
As with El Niño, the effects of La Niña differ spatially and temporally in their manifestations and impacts. Whilst some parts of the south west receive above average rainfall during La Niña growing seasons, the risk of flooding is predominantly associated with the northern, central, southern and eastern regions. Recent La Niña years include 1973–74, Brisbane’s worst flooding of the 20th century, the 1998–2000 period which saw flooding across parts of northern and eastern Australia and the 2011 floods which resulted in more than AU$2 billion of damage to the agricultural sector.
Average growing season rainfall anomalies (deciles) during the 12 most extreme La Niña years in the last century
Additionally, excessive and persistent rainfall during the harvest season can damage crops, negatively impacting yields. Although the Western Australian Wheatbelt generally benefits from increased growing season rainfall during La Niña years, it is less likely than other regions to be negatively affected by flooding during the growing season or excessive rainfall during the harvest season.
Average summer rainfall anomalies (deciles) during the 12 most extreme La Niña years in the last century
For the majority of extreme weather years occurring in Australia over the last century, owning farms in different parts of Western Australia, as opposed to different parts of Australia as a whole, would have been a more effective diversification strategy from the perspective of mitigating climate related risk.
Since yield reliability (rather than avergae yield levels) is one of the most important determinants of farm profits, rainfall reliability and extreme weather events have a major impact on investment returns. For a more detailed analysis on the relationship between yield variability and investment returns, download our free report, Comparative Analysis of the Australian Wheatbelt. The document also addresses the key question: which region of Australia has delivered superior returns to agricultural investors in the past and is most likely to offer superior risk adjusted returns in the future?
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