The La Nina weather system could roil global food production, sending prices higher, as potential droughts and floods bring upheaval to a suite of key agricultural commodities from South-East Asia to South America.
The highly anticipated phenomenon has officially formed, the US Climate Prediction Center said Thursday, after the last significant La Nina event occurred in 2011.
During that period, upheaval in commodity production led to steep increase in world food prices, with the United Nations Food & Agriculture World Food Price Index surging to a record in February 2011, up 37 per cent from the end of 2009.
La Nina typically affects a broad range of farm commodities, as it brings above-average winter-spring rainfall in Australia, particularly across eastern, central and northern regions, as well as in South-East Asia, with the potential for flooding.
It can also dry out the southern US through winter, bringing cooler temperatures and storms across the north. In South America, croplands in Argentina can become more arid, with drought possible across parts of Brazil.
The weather phenomenon disrupts production of a broad range of agricultural produce, such as soyabeans, corn, rapeseed, sugar, coffee and rubber, said Bloomberg Intelligences Alvin Tai.
Wheat
The 2010-11 La Nina brought Australia’s wettest two-year period on record, according to the country’s Bureau of Meteorology, and with it a strong 2011-12 winter wheat crop. This season, the crop could climb 78 per cent year-on-year to 27 million tons, the USDA FAS said in July.
“A wet spring will support pasture development and grain fill for the winter crop,” Rabobank said in its September agribusiness report. However, if wet conditions continue into harvest, it can reduce crop quality.
A late-season La Nina is unlikely to have any impact on the current winter crop in Australia, forecaster Abares said in its June outlook. The country’s harvest of grains including wheat and barley is due to start within weeks.
La Nina may also exacerbate a bout of dryness in Argentina, jeopardising what was supposed to be a record wheat crop in one of the world’s top exporters.
Soyabeans
Soya growers in the US might escape damage, with harvests typically complete by November. “Brazilian soya may be more at risk if drought and high temperatures weaken conditions for planting, which stretches from mid-August to mid-December,” said Tai.
The US, Brazil and Argentina account for about 80 per cent of soyabean production and smaller harvests can raise prices, according to Tai. In the 2011-2012 season, Brazil’s soy production declined 12 per cent.
Palm
Additional rains in South-East Asia could boost palm oil production, while the industry could also benefit from lower output of rival soy oil, Tai said.
“There has already been more rain in South-East Asia, particularly in Sabah and Kalimantan, since June,” said Ling Ah Hong, director of plantation consultant Ganling Sdn. “La Nina’s impact on the palm crop would depend on how strong it is,” Ling said.
“A weak to moderate La Nina is usually beneficial to palm production in the following year,” he said. However, the heavy rains, if any, may cause immediate short-term disruption to harvesting and crop quality.
“Palm oil production usually declines in December and January, after rising in August and September,” said Derom Bangun, chairman of the Indonesian Palm Oil Board. “More rain in those typically drier months could be positive for monthly output, providing conditions aren’t extreme,” he said.
Coffee
La Nina and El Nino events can lead to steep differences in coffee prices. During the last big La Nina, arabica prices surged as much as 127 per cent between 2010 and 2012, while robusta gained as much as 105 per cent.
Arabica is mostly grown in Brazil, which can be hit with drought during La Nina, while the premium narrows during El Nino years, as robusta crops in Vietnam and Indonesia are hit by drought, said Tai.
“The coffee output from Brazil, Colombia and Indonesia fell 5-10 per cent during the same period, while Vietnam’s output climbed as more areas were planted with beans,” Tai said.
“La Nina tends to bring adverse above-average rains to many parts of Colombia, and its effect may start to show up from October to December,” said Roberto Velez, chief executive office of Colombia’s National Federation of Coffee Growers.
While that may benefit areas that traditionally get less rain, the darker days caused by excess clouds reduce the luminosity necessary for flowering to occur, eroding overall yield potential.
Higher humidity can also trigger outbreaks of coffee-leaf rust, which happened between 2010-12, curbing output. However, about 80% of the plants in the second-largest arabica producer are now resistant to rust, compared with a very low percentage during the last La Nina, he said.
“Still, Indonesia’s coffee production may decline, as the rain causes coffee cherries to fall or rot, especially if rain occurs more than 10 days straight,” said Moelyono Soesilo, head of speciality coffee and processing at the Association of Indonesian Coffee Exporters and Industries.
Sugar
“Sugar output from Australia, Brazil and Thailand could be affected,” Tai said. Drought could cut production in Brazil, with yields down 12 per cent during the last big La Nina. In Australia, its heavy rain in the country’s north that could create harvest delays.
“The crush is almost half way done in Australia’s growing regions and La Nina years can bring an unwanted wet end to the domestic crushing season,” said Charles Clack, a Rabobank commodities analyst, in the September report.
Cotton
“For cotton, drier-than-normal conditions in southern and western Brazil and northern Argentina could have a negative impact on crops there, while more rain could benefit Australian fibre,” according to Donald Keeney, senior meteorologist with Maxar in Gaithersburg, Maryland.