AUSTRALIA'S rural sector is facing a potentially torrid end to 2015 as the threat of drought from a colossal El Nino intensifies.
The impact of ocean current movements in the Pacific - as warm water pools move east, evaporation and, in turn, rainfall declines - threatens to dampen the mood of a sector recently buoyed by the Trans-Pacific Partnership (TPP) agreement.
The Bureau of Meteorology (BOM) has warned that the impact of El Nino was escalating, and that the north-east and south-east of Australia were likely to be drier than average for the remainder of the year.
Jaci Brown, a senior research scientist at CSIRO with expertise in tropical climates and oceanography, said reduced rainfall led to reduced pasture growth which affected cattle. "It has huge implications," Ms Brown said.
"We've already seen bushfires. It could affect meat supply and heat stress can lead to reduced milk supply."
El Nino, which can translate as "Christ Child" in Spanish, was a name that emerged out of South America in the 1600s to describe unusually warm water in the Pacific Ocean around Christmas time.
Meteorologists would later recognise that droughts were occurring simultaneously in vastly different locations - such as India and Australia - and that they might be linked to global factors.
While the risk to farmers and, in the case of fire, human life is heightened, BOM analysis shows that widespread drought is no certainty. During the very strong El Nino of 1997-98, the impact on rainfall tended to be confined to the south-east coast, whereas the weaker 2002-03 event resulted in significant drought.
Nonetheless, the risks in 2015 are elevated.
Campbell Keene, Rabobank senior manager, agribusiness risk and treasury management, said Australian wheat production was 27 per cent lower in El Nino years.
"The last two weeks have been very dry across the grain belt and there's no rain on the horizon in the next fortnight," Mr Keene said.
He said that the promising start to the season was now under threat, just weeks before harvesting began.
"We started with such a good moisture profile...but grain farmers need some rain to finish the crops off."
Eastern state farmers were preparing for El Nino last year, before the threat passed, and some scientists joked it was an "El Nada", meaning "nothing". With such a strong start to the season, many thought the threat would subside again, until the BOM warned during the week that there had been signs of sea surface cooling in the waters to Australia's north-west.
The threat to crops has led some market participants to buy up physical grain, and the Australian Securities Exchange wheat futures are also rallying. The ASX Milling Wheat futures January 16 Contract was trading around $300/mt on Friday, up from about $275/mt two weeks ago.
The imminent risk to crops contrasts with some potentially good news for the sector through increased access to foreign markets via the TPP.
Australian farmers have generally welcomed the trade pact struck between 12 countries around the Pacific rim, despite it falling short of some industry expectations.
The agreement will allow for an additional 65,000 tonnes of Australian sugar into the US, and the government said the deal provided for future quota allocations that could see Australian agricultural exports dramatically increase.
