A shift in weather patterns could raise grain prices
Fall weather has been beautiful around most of farm country, allowing harvest to roll on. As U.S. producers prepare for winter, many are turning their attention to weather in South America, where planting is underway.
This spring, many weather experts predicted La Niña would arrive earlier in 2016 and match the strength of El Niño in 2015, but those conditions didn’t materialize. Now, cooling ocean temperatures point to La Niña fully developing late this year or early next year. That’s good news for the U.S. but not for South American producers, who will be growing their crops, says Brad Rippey, USDA meteorologist.
La Niña can create a “higher potential for drought affecting Argentina’s corn and soybean production” as well as production in southern Brazil, adds Mark Brusberg, South American meteorologist for USDA. Weather challenges in the Southern Hemisphere could send U.S. soybean prices higher, says DuWayne Bosse, a producer and market analyst with Bolt Marketing in Britton, S.D.
“In soybeans, you almost need a record crop every six months, one from us and one from South America,” Bosse says. “If you get anything less, prices tend to spike.”
It wouldn’t take much for a weather market to take hold and rally futures, Bosse adds. Parts of Brazil already looked dry as of mid-October and were dry in 2015, too. Yet Brazil is hard to monitor, Brusberg cautions. There hasn’t been a noticeable difference in yields from one year to the next.
Planting conditions in Brazil and Argentina look great now, but Brusberg warns that in the past, La Niña problems haven’t begun until December. “Usually, a heat wave develops in the latter half of December,” he says.
It’s possible La Niña won’t develop. False starts aren’t unusual, and commodity markets could dip if conditions change.
Evaluate the Odds of a U.S. Drought
The term “La Niña” evokes images of drought, but the reality is more complex, says Brad Rippey, USDA meteorologist for North America. Typically, La Niña lasts through just one cold season in the Northern Hemisphere, limiting the extent of any dryness. If it does materialize, it could be gone shortly after planters roll. Yet that’s not always the case because it’s difficult to forecast U.S. weather for the warm season after La Niña unfolds, Rippey says. If La Niña persists into the growing season, drought-like conditions can emerge. “There is a very slight tilt in the odds for drought coverage in the U.S. the stronger La Niña gets and the more persistent it is,” he says. Still, producers can breathe easier simply by pulling out a map: The U.S. is a huge country, so depending on the jet stream, farmers in western states could experience severe drought while those in the Corn Belt could have a growing season that proves to be perfectly normal.