Home Business ‘Three-peat’ La Nina outlook perpetuates W. Hemisphere crop worries -Braun

‘Three-peat’ La Nina outlook perpetuates W. Hemisphere crop worries -Braun

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NAPERVILLE — Production of commodity crops in parts of North and South America run drought risks whenever La Nina is present, which according to forecasts will be the case this year for a third consecutive season.

That kind of “three-peat” is uncommon for La Nina, characterized by cooler surface waters in the equatorial Pacific Ocean. This will keep the market on alert, particularly since recent harvests have fallen victim to dryness.

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The probability that La Nina sticks around into early 2023 has been increasing. U.S. climate forecasters on Thursday put the chances of La Nina during October-December at 89%, up from 79% last month and 66% in July.

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La Nina’s longevity remains in question with 54% chances in January-March 2023 versus 45% odds predicted back in July, but the latest outlook still supports the “three-peat.”

TRIPLE THREAT

La Nina and its warm phase cousin El Nino typically reach peak strength in Northern Hemispheric winter, so a La Nina, El Nino or neutral season occurs when conditions are satisfied for most of these months.

La Nina most recently arrived in mid-2020 and has been relatively strong since late 2021. If it stays through early 2023, this latest episode will be the third official La Nina “three-peat” in more than half a century.

The other two instances lasted from 1973 to 1976, and then from 1998 to 2001. There have been no quadruple La Nina years, but neutral-negative conditions lasted throughout 2001.

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Both prior triple cases immediately followed very strong El Nino episodes, but the 2019-20 season featured neutral-positive, nearly El Nino conditions.

In the case of U.S. crops, the 1973-1976 La Nina stretch featured the horrible corn harvest of 1974 followed by disappointing crops the next two years. The 1999 through 2001 harvests were not notable but not necessarily good, either.

Argentina’s corn and soy harvests were also modest from 1999 to 2001. Brazil’s soy crops were successful during this period, but the second corn harvest in 2000 was terrible.

The connections to past triple La Nina crops are mostly for interest, though it is noteworthy that neither Argentine nor U.S. harvests have been amazing during those stretches.

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MORE MISSES

A fading La Nina to start 2023 could be favorable in Argentina, where soybean yields highly depend on rains in February and March.

Argentina’s latest two harvests were both cut short by drought, and Brazil’s year-ago soybean yields were among the worst ever on the same account. Crops in the southern U.S. Plains, which also trends dry during La Nina, disappointed this year.

Southern Brazil’s recent crop losses were catastrophic, though the latest soil moisture readings are decent ahead of this year’s planting, which will ramp up next month.

However, Argentina’s grain belt remains dry, and the seasonal forecast continues leaning that way. Argentine soybean planting escalates in November, and farmers sow corn between September and January.

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U.S. winter wheat planting for the 2023 harvest recently began in very dry conditions. Drought covers 96% of lead producer Kansas compared with 31% a year ago and 38% two years ago, all three years under La Nina’s watch.

It is important to remember that not all La Nina harvests in these susceptible regions end poorly. Some have actually been highly successful, but La Nina always heightens the risk for losses.

HURRICANE VOID

La Nina is often associated with an active Atlantic hurricane season, but so far it has been among the quietest in decades. That has eased supply concerns in the oil market as hurricane-vulnerable U.S. Gulf production has avoided weather disruptions.

Persistent dry air masses off the western coast of Africa, where Atlantic hurricanes first develop, have interrupted the normally favorable atmospheric conditions provided by La Nina.

Saturday marks the historical peak of Atlantic hurricane activity, but the storm threat may not necessarily fizzle from here as the oceans remain supportively warm. The season officially ends on Nov. 30, and it is not uncommon to observe strong storms from now until then.

That could disturb both oil production and U.S. Gulf grain exports, the latter of which were highly limited last September following a late August hurricane that damaged terminals. Karen Braun is a market analyst for Reuters. Views expressed are her own.

(Writing by Karen Braun Editing by Matthew Lewis)

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