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A late 2020 La Nina raises crop risks for already-dry Argentina, Kansas

Traders may want to be on alert earlier than usual over the forecast for a possible La Nina later in the year, because although drought does not accompany every episode, some crop-growing regions that are more likely to be negatively affected by La Nina are already dry.

The U.S. Climate Prediction Center on Thursday pegged the chance of La Nina developing during the Northern Hemisphere fall at 50-55%, with a 50% chance it will persist through early 2021.

La Nina, characterized by cooler-than-normal surface waters in the equatorial Pacific Ocean, was last observed in 2017-18, and it was an event that some farmers in both North and South America unfortunately cannot forget.

Persistent dry conditions associated with La Nina are most likely to occur in Argentina and southern Brazil, along with the southern U.S. Plains, where the country’s hard red winter (HRW) wheat variety is grown.

In early 2018, Argentina harvested its worst soybean crop in nine years, and Brazilian corn output was also well below initial hopes. U.S. HRW wheat yields were poor that year, and dryness in that area carried into the corn and soybean growing season.

But there was also a La Nina in 2016-17, and crops in those regions were largely unaffected. Most people do not remember that La Nina event, as it did not behave much like one and the typical impacts were not observed.

It is too early to know exactly how the potential upcoming La Nina episode will develop and unfold, and that will be very important to gauge whether negative crop impacts are likely.

Strength will be key. There were stronger sea surface temperature anomalies recorded in 2017-18 than the year before, keeping that region of the ocean sufficiently cold throughout the episode. The cool water temperatures were weaker and less consistent in 2016-17, which is how some of the weather observed was able to more closely resemble the warm phase El Nino.

The timing also likely matters. In 2016-17, the La Nina occurred almost completely in 2016 and by January, the cool anomalies faded, giving way to warmer ones by February.

But in 2017-18, a much stronger cold anomaly held from November through March. Had it weakened earlier, relief could have been possible for the suffering crops in the Americas before it was too late.
ALREADY DRY

Parts of Argentina have dried out since the beginning of the year, and soil moisture in primary growing provinces Cordoba and Santa Fe reached the lowest levels for June in at least five years. Argentina harvested a slightly subpar soybean crop earlier this year and as of Wednesday, some 89% of its bumper corn crop had been collected.

But the new wheat campaign is already at risk. Argentina’s Rosario grains exchange on Wednesday cut its outlook for the country’s 2020-21 wheat harvest as persistently dry weather has reduced plantings. However, the crop was just planted and will not be harvested until the end of 2020, so yield concerns are still premature.

Brazil’s southernmost state of Rio Grande do Sul had a difficult corn and soybean harvest earlier this year because of dryness, and although rainfall has been better in recent weeks, soils are still parched.

The Southern U.S. Plains have trended drier in recent months. Back in March, only 14% of top HRW state Kansas was in a drought, according to the U.S. Drought Monitor.

As of Tuesday, drought conditions covered 68% of the state. Dryness is more severe in surrounding HRW wheat areas such as Oklahoma, the panhandle of Texas, and eastern Colorado.

One potential winner of a late-2020 La Nina event is Australia, which has had three drought-stricken wheat crops in a row, each one progressively worse. La Nina years are often associated with plentiful rainfall across the wheat exporter’s grain belts.

However, just as it does not always create drought in the Americas, La Nina does not always provide soaking rains for Australia. That was the case for its 2017-18 wheat harvest that was curtailed by drought. But the next two crops were substantially worse.

The outlook for Australia is already better this year as the first five months of 2020 were wetter than average, especially in eastern areas, snapping the record-breaking run of dry seasons. Australia expects the upcoming wheat harvest to be its largest in four years.

Source: Reuters (Editing by Matthew Lewis)

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