La Niña

Anticipating the outcomes for agricultural investment

El Niño’s little sister La Niña can cause droughts and heavy monsoons. Constant monitoring is a must for agricultural investors.

La nina Bonnieux 02

Climate and weather patterns are one of the most significant limiting factors of agricultural production.

After one of the strongest El Niños in 2015/16 made 2015 the warmest year in global history, there is a 55–60% chance of a La Niña event occurring in autumn and winter 2016/17.

Different outcomes

As every La Niña event may have different outcomes (La Niña benefits some agricultural producers while harming others), a thorough understanding of this climate phenomenon is a key success factor not just for food security but also for agricultural financing.

Given the damage it can cause, La Niña requires constant monitoring for agricultural investors.

Research Brief La Nina

The responsAbility research paper La Niña – anticipating the outcomes for agricultural investment shows how responsAbility assesses the likely impacts of La Niña.

What is La Niña?

La nina graphicEl Niño and La Niña, together called El Niño Southern Oscillation (ENSO), are considered the most important climate process besides seasonal changes.

During a period of La Niña, the sea surface temperature across the equatorial Eastern Central Pacific Ocean is about 3–5 °C lower than normal.

Unlike El Niño, which usually lasts no more than a year, a La Niña event may last between one and three years and occurs in a two- to seven-year cycle.

What are the impacts of La Niña?

La Niña can cause droughts along the western coast of South America, southern California, Chile, southern Brazil and northern Argentina, as well as in East Africa. 

It also leads to increased rainfall in northern Brazil, Indonesia, Malaysia and northern Australia, and brings stronger than average monsoons to India and Bangladesh. 

Southern and western Africa also receive additional rainfall.

While some of these outcomes can be beneficial, the phenomenon is better known for the damages it causes: harvests can be destroyed, threatening food security in many regions.

Financial Times, January 2016

What does this mean for investments?

While the mechanisms that cause the oscillation remain the subject of scientific research, the impact of La Niña is documented and forecasts (based on significant recurring statistical patterns) of potential impacts can be made. 

To better understand the dynamics of this phenomenon, responsAbility has created a database that incorporates data from previous La Niña events to point out likely impacts on its portfolio. 

The assessments are based on each country’s local climate and harvest dynamics and are continuously updated as La Niña progresses. 

Agricultural investment officers can therefore establish whether increased risks may arise in the following planting and harvest season to better assess the risks for new and existing investments.

Gaëlle Bonnieux

Gaëlle Bonnieux, Head Agriculture Debt Financing at responsAbility

“The close exchange with our clients in the agricultural sector, combined with advice on potential mitigants such as irrigation or planting different crops are key success factors in our efforts to maintain a strong portfolio and promote growth.”

Gaëlle Bonnieux

Research Brief La Nina

Read the full research paper La Niña – anticipating the outcomes for agricultural investment.

The source for all information mentioned herein is responsAbility Investments AG unless not mentioned otherwise.