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La Nina Rattles Market

November 2, 2010
 
 

TP 046 T10184

> The brown sections show that vegetative health is considerably worse than
the same time last year. Blue sections are in better health.

Commodity traders, always on the hunt for reasons to drive trades, have La Niña in their sights. The cool ocean water phenomenon is already established in the Pacific Ocean and likely will remain in effect until spring.

This La Niña will peak in the next few months at a very strong intensity and then level off for spring 2011, says Allen Motew, meteorologist for QT Weather. It is expected to be the strongest ever recorded.

Classic La Niña conditions are playing out in South America right now, reports Drew Lerner of World Weather, Inc.: “Those conditions include less-than-usual rainfall in Argentina, Uruguay and southern Brazil. Also typical is late seasonal rainfall and then erratic rains in the initial weeks of the rainy season.”

Virtually no rain fell in northern Brazil from September to mid-October, and what did fall was slight and erratic. As a result, Lerner says, planting was slow, with poor emergence. “The early planted crop that often is available about the time that U.S. soybean supplies are running out, filling a gap in the supply chain, may not materialize this year,” he says.

“I think we will be lucky to see 100,000 to 200,000 tons harvested in January,” says Kory Melby, a Minnesotan who has been based in Brazil for 10 years. “The state of Paraná has been getting nice rains, with corn and soybean planting under way in mid-October. Paraná will have the first soybeans to be ready in 2011 on about Jan. 15.”

However, with erratic weather already disrupting normal planting in Brazil, specifically the states of Mato Grosso and Goiás, production potential is uncertain. Once the rains start, farmers will wait until the soils cool off and recharge moisture content, Melby says. “It is starting to look like planting will start 45 days late, around Nov. 1.”

“I think 300,000 hectares of prime land will be left idle until December,” he adds. “This area will be planted to long-season cotton. With cotton at $1 per pound, this will reduce Mato Grosso’s soybean production potential by 1 million tons.

“Early reports suggested Brazil would cut back on first-crop corn area. With $6 corn on the horizon and late planting, maybe a few producers will give corn a second look now,” he says.

In mid-October, Motew says, rains in some parts of Brazil improved crops. “Vegetation health condition changes on a weekly basis show improvement, but crop health in most of Brazil still lags considerably from this time last year. Surprisingly, Argentina’s vegetation is much improved from last year.”

Conditions should continue to improve, Lerner says. “If La Niña behaves as we anticipate, there will be a period of improved rainfall for central and northern Brazil from late October through November.”

Impacts in the U.S. The last strong La Niña event during a Northern Hemisphere winter occurred in 1988–89. This year, Lerner expects a high-pressure ridge to build over the heart of the U.S., bringing a warmer and drier than usual bias from the Southern Plains and Southwest through the Delta and into the Southeast and portions of the Midwest. Then, while dryness may remain in the Gulf Coast states into spring, late-winter and early-spring precipitation may rise above average in the Midwest, delaying early planting and keeping the market on edge right into spring.

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FEATURED IN: Top Producer - November 2010
RELATED TOPICS: Weather, Marketing, International

 
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