Being one of the key climate drivers of rainfall patterns here in Australia, this change always brings potential to upset the apple cart.
However, resources built up over the past three years are likely to provide some insulation for domestic input markets.
While there is speculation around the severity of any potential event later this year, the one certainty is that El Niño conditions typically suppress rainfall across eastern Australia over the winter and spring.
Australian agriculture is somewhat prepared though.
One of the greatest legacies of the past three years has been continually improving water availability and resources built within water storages.
While the potential for drier than average conditions across large parts of the country is a concern, the wet seasons together with carryover rules in irrigation districts, have already underpinned availability for the 2023-24 water year.
Further improvements to determinations later into the season, however, hinge on future inflow conditions.
Temporary water prices are also at the mercy of inflow conditions.
If average or better inflow conditions occur over the coming months, minimal price movement is likely, while demand remains subdued.
If below average inflow conditions and rainfall prevail, we are likely to see some upward price movement, however, current resources and water availability will keep this in check, at least over the short-term, as prices continue to fall despite demand from water users increasing in recent months.
Heading into the 2023-24 water season, temporary water prices across northern Victoria and in the Murray Irrigation system are currently 56 per cent and 13 per cent below May last year, at $10/Ml and $2/Ml respectively.
A good autumn break and timely follow up rain has made for a decent start to the winter cropping season.
Fodder prices remain significantly elevated, and this is likely to continue while reliance on last season’s supply remains.
Looking ahead though, over the course of the new season, this will be increasingly mitigated by the expected return to average production, together with adequate on-farm feed supplies and low water prices.
While domestic water and feed input prices are more directly influenced by our climate and weather outlook, fertiliser values remain much more at the whim of geopolitical volatility and global supply pressures.
After the incredibly elevated prices of the last two years, falling natural gas prices and quietening purchasing demand around the world have contributed to an easing of fertiliser prices in recent months.
Compared to May last year, global indicative prices for diammonium phosphate (DAP), urea and muriate of potash (MOP) have fallen 36 per cent, 51 per cent and 30 per cent respectively.
Coupled with cheap irrigation water and strong water availability looking forward, falling prices are likely to incentivise increased purchasing and application rates this year, with a consequent boost to both crop production and the quality of pastures and homegrown feed.
So, in weighing up the potential for drier conditions to negatively impact the input markets that dairy farmers actively operate within, it is important to consider the events of the past three seasons.
Although this likely shift to drier El Niño will weigh on the availability of water and the production and supply of feed, resources built up over this same period are likely to mitigate the worst of it and support farmers through this change.
