Prices of wheat, corn and soybeans have remained volatile with an upward edge. Weather, although not the only factor, has been a major driver of these volatilities.
La Nina is likely to continue through the Northern Hemisphere winter 2022-23, with a 91% chance in September-November and decreasing to a 54% chance in January-March 2023, making it the first triple-dip La Nina of this century, according to latest forecasts. The phenomenon has varying impacts on agriculture across the globe and it particularly impacts Brazil, Argentina, the US and Australia — key suppliers of corn, soybeans and wheat.
Corn, soybeans in Brazil
The southern regions of Brazil are prone to dry weather conditions during La Nina.
In marketing year 2020-21, Brazil’s corn output fell sharply due to La Nina conditions. First-corn crop production in MY 2021-22, which comprised more than 21% of the country’s total production, also fell due to dryness caused by La Nina.
The first-corn crop in Brazil is planted from September through December and harvested February-May, while the second-corn crop is planted from February-March and harvested June-July.
Soybean yield in the southern states of Brazil also fell sharply in 2019-20 and 2021-22 due to the impact of La Nina.
Weather forecasts continue to show sporadic and below-average rainfall in practically the entire southern region of Brazil in October and November, according to Brazil’s National Institute of Meteorology.
La Nina in Argentina
The core agricultural regions in Argentina are reeling from drought, with the driest winter since 1995 raising concerns about the production of major grains and oilseed crops in the 2022-23 season.
Historically, La Nina’s impact on crops in Argentina has been adverse when compared with its northern neighbor Brazil. Corn, wheat and soybean yields have taken a hit during most of La Nina years.
Although 2022-23 early corn planting is yet to start in Argentina, local commodity participants said production is likely to be lower than the previous season.
The area under corn and wheat is already seen declining slightly on the year in MY 2021-22, according to preliminary forecasts from the Buenos Aires Grains Exchange.
Drought, hurricane in the US
La Nina in the US typically results in colder and stormier conditions across the North, but warmer conditions in the South. Persistent drought-like conditions over the southern parts of the US resulted in a significant decline in US wheat yield estimates in MY 2021-22. This year, however, the conditions are seen improving on the year.
The dryness witnessed in the Midwest has impacted corn planting in MY 2022-23 as well, resulting in a fall in yield estimates.
La Nina also leads to above-normal hurricane activity in the Atlantic basin. Last year, hurricane activities impacted US grains exports because of widespread damages to infrastructure.
So far this hurricane season, signs of that have been limited.
Australian wheat — a different story
La Nina typically leads to wet conditions in eastern Australia that favors wheat planting.
Current forecasts are for higher chances of above-average winter-spring rainfall for Australia and for higher wheat production in the country.
The Australian Bureau of Agricultural and Resource Economics and Science has scaled up its forecast for wheat output for MY 2022-23 to 32.2 million mt from 30.3 million mt. The output is likely to increase due to adequate rainfall in recent months leading to increased soil moisture, according to sources.
Though La Nina usually supports agriculture production with higher rainfalls, it is also linked with catastrophic floods in northern Australia.
Wet monsoon in Southeast Asia
Rainfall associated with the summer monsoon in Southeast Asia tends to be above normal during La Nina, benefitting the production of rice. India, Pakistan, Thailand and Vietnam are major producers of rice and contribute to more than 70% of the global rice trade.
Rice yields are generally supported by higher rainfall as it is a water-intensive crop.
However, rains in India during the rice planting season have been sporadic this year. La Nina is likely to result in an extension of the southwest monsoon season that normally ends in September to October. This can impact the mature rice crops in fields.
Dryness in parts of Africa
La Nina is associated with deficit rainfall in equatorial eastern Africa. East Africa is already experiencing its worst drought in four decades, with five consecutive years of severe drought conditions.
South Sudan, Somalia, Ethiopia, Kenya, Tanzania, Rwanda and Uganda are likely to receive lower rainfall as a result of La Nina, decreasing food production estimates amid a global grains supply tightness.
In East Africa, persisting rainfall deficits have sharply curbed production prospects with severe food insecurity implications, the Food and Agriculture Organization said in a report.
A fall in production in east African countries might be met with lower supplies elsewhere, further exacerbating supply concerns.
