Water represents an important resource for agricultural production because crop biomass accumulation is directly related to the amount of water utilized by crops during the evapotranspiration process. Irrigation represents an agricultural practice that seeks to ensure the total satisfaction of crop water needs, allowing the expression of the crop growth potential. Normally, operational costs of irrigation are relatively low compared to the value of the agricultural products so the farmers usually restore the amount of water consumed by crops between two consecutive irrigations.

When water supply is scarce, the farmer faces an important problem of water allocation both in time and among crops. In this case, the productivity of additional units of water is taken into account, and the decision has to be made considering the future rates of evaporanspiration creating a time-dependent optimization problem.

It has been demonstrated that El Niño phenomenon shows an important footprint in the climatic regime of several parts of the world, affecting not only the precipitation regime but also meteorological variables that determine the rate of evaporation. In this sense timely and skillful forecast of El Niño provide with climatic information that can be used at farm level for optimal irrigation management.

This paper addresses this issue showing that information obtained from El Niño forecasts has an economic value. Using a simple dynamic soil-crop algorithm based on Jensen’s model it is possible to obtain solutions to the water allocation problem that are conditioned on El Niño phases, creating additional net benefits as a consequence of a more efficient water allocation policy.

A case study that represents common agricultural and climatic conditions of Central Chile is presented here as an illustration. This work also shows the main relationships between the economic potential of irrigation based on El Niño forecasts and the severity of the drought.