El Niño Friendly to U.S. Crops, Unkind to Southeast Asia

(Reuters) –  El Niño might be on tap for mid-2017, a faster than normal reappearance, and the potential impacts on global agriculture depend partly on the timing of its arrival.

El Niño is the warm phase of El Niño-Southern Oscillation, which is characterized by sea surface temperature variations along the equatorial Pacific Ocean. Both El Niño and its cold counterpart La Niña are known to alter global climate patterns whenever either one is present.

La Niña just concluded a short-lived run earlier this year, and several climate models and forecasters are flagging the possibility that El Niño – which last occurred in early 2016 – could resurface in a couple of months. That would be much sooner than the typical hiatus of two to seven years between episodes of El Niño.

Many in the industry associate El Niño with disastrous weather worldwide and potentially damaging effects on agriculture, but this is highly dependent on both the region and crop – as some of them tend to benefit from the phenomenon.

There does not appear to be a significant relationship between the midyear state of ENSO and corn or wheat production trends at the global scale – likely due to the wide geographical dispersion of grain growing regions.

For corn, this observation holds true even when isolating the big three exporters – the United States, Brazil and Argentina – which account for 75 percent of global corn trade.

These same three countries produce 82 percent of the world’s soybeans, and El Niño seems to have a positive impact on worldwide production when the warm cycle is in place between at least March and September.

But the global output of rice – a staple grain in Asia – is decidedly cut down by El Niño as it presents unfavorable weather directly to its prime growing areas.

Even though wheat and corn are not concretely impacted either way by El Niño on the global level, its effects on the individual countries and thus the global market can be very different depending on the roles of each.

The United States has not had a widespread weather problem during the summer growing cycle since 2012, which has allowed the country to turn out the four largest-ever corn crops in the following years. The last three years have also featured record soybean production, with considerable contribution from huge yields.

Statistically it would seem as though the United States is due for a tough growing season weather-wise, but if El Niño returns in time for summer, then 2017 may be less likely to present difficulties.

Not all climatologists agree over whether the ENSO cycle influences weather during the U.S. corn and soybean season. But past El Niño-season results suggest there is a better chance for good crops than bad, as both temperature and rainfall patterns have generally been supportive.

Summers in which El Niño or El Niño-like conditions were present or imminent coincided with some of the best-ever growing seasons in the United States, including 1982, 1987, 1994, 2004, 2009 and 2014.

However, there have been a couple of years in the mix that were unfriendly to the U.S. harvest – 1991 and 2002 – in which summer temperatures were too warm. Additionally, in 1991, planting was severely hampered by wet spring conditions.

As long as the weather cooperates through planting this spring, an El Niño occurrence this summer could be favorable for U.S. corn and soybean yields. But there is always the chance that a 2002 situation arises, especially since some dryness is already spreading into the Corn Belt.

OTHERS NOT SO LUCKY

Producers in the Eastern Hemisphere tend to be more challenged by El Niño than those in the West, as the phenomenon often curbs rainfall from India to Australia, and a quicker return to the warm ENSO cycle could add stress.

Indian wheat farmers rely on monsoon rains between July and September to have sufficient soil moisture to plant the crop when rainy season ends. El Niño’s arrival often clips the end of the monsoon, leaving India – one of the largest producers and consumers of both wheat and rice – drier by the time growing season begins.

But if El Niño comes sooner – which some forecasters think could be as early as June – the Indian monsoon might be reduced more significantly than in the past, placing heightened risk on the country’s agriculture industry.

An earlier onset of El Niño may also affect Australia, as it may dry out the tail end of the country’s wheat planting – which starts next month – and keep conditions dry through to harvest in December.

Most of Australia’s worst wheat harvests were associated with El Niño’s presence, though during the two strongest El Niño episodes – 1997 and 2015 – the harvest turned out relatively normal.

Australia is a key exporter of wheat and is coming off a record crop in 2016/17, stemming from optimal weather during the growing season. But some of the main producing regions in the eastern half of the country have turned very dry since then, and this places some extra pressure on rainfall in the near term before El Niño’s potential visit.

Palm oil could also fall victim to the El Niño-driven dry trend in Southeast Asia as it often slows output in the two main producers, Malaysia and Indonesia, especially if the warm cycle appears sooner rather than later.

Production of the tropical oil was not majorly impacted early on in El Niño’s most recent run from late 2014 through early 2016 thanks to sufficient rains from other climatic features, which also explains why Australian wheat did not suffer too much in 2015.

Malaysian palm oil output was at record high levels throughout the middle of 2015 but sharply fell off at the end of the year. Production stayed relatively suppressed throughout 2016, sending supply to a six-year monthly low by January 2017.

Analysts and traders close to the Malaysian market last year noted that the lower levels of production, especially toward the end of 2016, were likely attributable to the delayed impacts of El Niño.

Malaysian palm oil output rebounded this January, topping the previous two Januarys. But if El Niño returns this year and again weighs down the oil’s production, there would not be much recovery time for the stocks, which could fall even further.