El Niño Southern Oscillation (ENSO) anomalies are responsible for medium-frequency climate fluctuations across many regions of the world. Not only ENSO induces temperature and precipitation variability in the affected regions, but it is also responsible for larger magnitude weather anomalies, such as droughts, hurricanes, and tsunamis. All these directly impact agricultural production. The overall objective of this research is to determine the relationship between ENSO and world major cereal production. While several studies have addressed the issue, this research contributes to the literature in a number of directions. Firstly, it measures the ENSO effect net of temperature and precipitation. Secondly, it allows for the threshold-like effect of ENSO; that is, El Niño effects are not mirror images of La Niña effects. Thirdly, it incorporates expected price in the regression setting, thus controlling for an important economic variable affecting crop supply. Finally, this study applies the largest possible panel of countries, to analyse the region-specific peculiarities of the ENSO–production relationship, and to best approximate the global production effect of ENSO anomalies. This study uses a combination of extensive climatic and economic datasets spanning the years 1962-2009 to empirically measure the impact of ENSO on wheat, maize and rice production, via a threshold regression framework. The results reveal statistically significant and economically meaningful ENSO impact on cereal production in many regions, with particularly strong effects in Southeast Asian and American countries. Although the expected global effect may camouflage the country-specific effects, the research findings suggest that El Niño shocks are likely to cause on average a reduction in global production of rice and maize. La Niña episodes, on the other hand, are associated with increased global rice and decreased global wheat and maize production. Although consequences of ENSO shocks on a global scale are sporadic, understanding the overall impact of ENSO on major grain production is an important tool for managing global food security. Results of this study provide implications for food policy makers, and help them develop precautionary economic policies that will take advantage of ENSO signals to cope with production shocks and ensure food availability, which is particularly relevant in the developing world
