El Nino Is Back And There Will Be Impacts On Weather And Crops

The bad boy is back! It is official, we are in an El Nino year. So say all the experts, with the Australian weather experts adding their confirmation to NOAA and others. The big question is does it stay a weak, grows further to a moderate phenomena, or grows to a strong El Nino. The strength of the El Nino can have major impacts on weather and therefore the crops many of us focus on.

A bad little boy (El Nino) can wreck havoc on some of the major crop of the world. The FT already has an article on the Monsoon blues that "...threatens India's farms and its economy". Many forecasters are projecting a weak or moderate El Nino, but watch out if it does become moderate or even strong. A strong El Nino could result in a severe drought in India (they have just cancelled the export of wheat from India, just in case they have crop failures and a famine). In India the drought is impacting sugar, corn and pulses already. Other countries that would be impacted by drought would be Indonesia and Malaysia, the two largest producers of palm oil, the largest source of edible vegetable oil and a large share of Wilmar's palm oil base. Lower palm oil production would increase the demand for soybean oil which right now is a major problem for crush rates. This would have a favorable impact on ADM, Cargill, Bunge and Louis Drefus, all major soybean processors in the US and South America. A drought in these countries would also impact rubber production, still critical for airplane tires and some other special uses.

Australia's wheat crop could also be impacted by a drought later this year in their spring season. Australia just increased their wheat crop estimates, but they could drop. Grain companies based in Australia could be impacted by a drop in grain production including ABB, AWB and even Viterra out of Canada who is planning to purchase ABB.

In the Americas, the fishmeal industry could be impacted by a shift away from the coast of their cool Humbolt water current which would be replaced by a warmer, less productive El Nino current. Heavy rains could be seen starting in Ecuador and extending all the way down the Peruvian coast into Chile. On the other side of the continent, Brazil could see some areas with flooding and some with drought, both impacting a needed soybean harvest for early next year.

In the US the crops would not be impacted too much by a severe El Nino, but as can be recalled from the 1997/1998 El Nino, California could be hit by strong storms with lots of rains, floods and mud slides along the southern coast. The grain belt could see a milder winter, which after the past two La Nina years would be well received and would also lower natural gas use.

So there a lot of "coulds" here that need to be watched for if that little boy becomes a bad one.
Source:: http://www.glgroup.com