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Feature: Echoes of 1988 ring drought alarm bells

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We've already had the Winter Olympics in Canada, and the huge takeover involving Kraft, let alone longstanding Iraq and Afghan conflicts.

But just how far will 2010 resemble 1988?

That matters because 22 years ago brought America its last, and one of its worst ever, droughts, causing $60bn of damage estimated at 1988 prices.

"That's the benchmark year for droughts," Mike Mawdsley, at broker Market 1, told Agrimoney.com.

"Sure, I remember it. I was a farmer at the time."

'Very hot and dry'

He was one of those, indeed, who saw average soybean yields slump some 20%, with corn yields tumbling by 25%, thanks to a dearth of moisture and overdose of heat.

Large parts of the Midwest saw less than one quarter of normal rainfall in June and July.

And, as Mr Mawdsley noted, some in the US "are starting to talk about this year a lot like 1988".

"In that year we started well, but it then turned very hot and dry."

Weather echoes

It is little wonder that crop investors keep 1988 on their radar. In less than six weeks, from mid-May, wheat jumped by $1 to $4 a bushel, and corn soared from less than $2 a bushel to more than $3.50.

Soybeans spiked above $10 a bushel – a price they would not achieve again until 2004.

It is also little surprise that 2010 is ringing alarm bells.

This year, like 1988, is witnessing the end of an El Nino, a disruptive weather pattern associated with high Pacific water temperatures.

Both years started with similar winters, marked by cool and wet conditions in the western Midwest, as well as much of the Plains and Delta regions.

And, as MDA Earthsat Weather, a US meteorological service, points out, "the temperature scenario expected for the spring of 2010 is rather similar to 2988, with warm north and cool south."

Even forecasts of lower-than-average rainfall in many growing regions "match well with 1988".

La Nina factor

But there the similarity stops, according to MDA Earthsat analyst Kyle Tapley.

"The big difference is that while this year is expected to see the end of the El Nino, it will not mutate into La Nina," he said.

It was La Nina, a weather pattern caused by a cooling in Pacific waters, which caused much of the problem in 1988.

"La Nina is associated with hot weather in the US."

More likely is a cooler May in the Midwest, a chill which would likely support rainfall.

Be aware

For Mr Mawdsley, the big difference are forecasts for wet in the south of the Midwest.

"That would be different to 1988," he said.

But that doesn't mean investors relax that a repeat drought is not on its way.

"That when things happen, when people are not looking for them," he said.

By Agrimoney.com

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