Impacts of El Nino-Southern Oscillation on the wheat market: A global dynamic analysis

Although the widespread influence of the El Nino-Southern Oscillation (ENSO) occurrences on crop yields of the main agricultural commodities is well known, the global socio-economic consequences of ENSO still remain uncertain. Given the global importance of wheat for global consumption by providing 20% of global calories and nourishment, the monitoring and prediction of ENSO-induced variations in the worldwide wheat market are essential for allowing national governments to manage the associated risks and to ensure the supplies of wheat for consumers, including the underprivileged. To this end, we propose a global dynamic model for the analysis of ENSO impacts on wheat yield anomalies, export prices, exports and stock-to-use ratios. Our framework focuses on seven countries/regions: the six main wheat-exporting countries-the United States, Argentina, Australia, Canada, the EU, and the group of the main Black Sea export countries, i.e. Russia, Ukraine, and Kazakhstan-plus the rest of the world. The study shows that La Nina exerts, on average, a stronger and negative impact on wheat yield anomalies, exports and stock-to-use ratios than El Nino. In contrast, wheat export prices are positively related to La Nina occurrences evidencing, once again, its steady impact in both the short and long run. Our findings emphasize the importance of the two ENSO extreme phases for the worldwide wheat market.