Shift to La Nina a new ball game

The possibility of an early shift to a La Nina might be the only obstacle to another year of ample global grain supplies and low crop prices.

U.S.-based agricultural consultancy AgResource’s first forecast for 2016 grain prices was sobering with an outlook for harvest time prices for corn falling to US$2.80 per bushel, Chicago wheat at $4 and soybeans at $7.60. That assumes normal weather.

Corn is currently about $3.55, wheat $4.45 and soybeans $9.25.

All existing weather issues around the world are too small to threaten the expectation of continuing ample global crop supplies.


Globally, the grain carryover from 2015-16 is a large cushion. U.S. farmers are contemplating a huge corn acreage this spring.

South American grain is flooding out to world markets after a record harvest, and analysts think southern farmers will seek to boost production again next fall, particularly in Argentina where the government has removed regulations that restricted exports.

Focusing in on wheat, the weak prices of the last year are leading to reduced acreages for 2016-17, but again, not enough to make a significant difference.

For example, American farmers intend to reduce the total area of winter and spring wheat by about five million acres, or nine percent. However, the production lost from the fewer acres would be entirely offset by the increase in carry-in stocks so that total U.S. wheat supply for 2016-17 would be about the same as in 2015-16.

Markets had been watching for crop condition declines in the U.S. hard red winter wheat crop because of dry weather since the start of this year.

Farmers were worried, but now rain is forecast for the April 16-17 weekend, which should halt the decline.

Meanwhile, the U.S. Midwest and Delta regions have normal to above normal soil moisture going into seeding.

All this is keeping crop markets on a negative footing.

What could knock them off that trend? A rapid transition to a La Nina.

Weather experts began to talk late last year of the potential for a swing from the El Nino that dominated the weather for the past year straight into a La Nina, bypassing a neutral phase.

El Nino is warmer than normal water in the east-central equatorial Pacific Ocean. La Nina is cooler than normal water in the same region.

Ocean temperature readings in February and March indicated that the transition might be a bit slow, meaning a La Nina might not establish itself until autumn.

However, the latest data now indicates the potential for an earlier arrival.

Late summer would probably still be too late to have a major effect on American crop yields, but if it were to arrive in July, that would make things interesting.

A La Nina summer in the U.S. Midwest tends to be hot and dry.

Scott Irwin and Darrel Good of the University of Illinois looked at the history of El Nino-La Nina transitions going back to 1960 and found that such transitions occurring in summer raise the risk of corn and soybean yields falling below the trend line.

“Yield risk was generally larger the earlier that La Nina conditions emerged,” the economists wrote in Farmdoc Daily March 18.

There is no way to predict when a La Nina will arrive, if indeed it does form, but this is something that bears watching.

La Nina’s effect on prairie crops appear less studied, but most current long-range forecasts indicate a warm summer with Alberta at risk of dry weather.

Looking farther afield, La Nina tends to bring increased rainfall to Australia, southern Asia and India.

There is also an increased potential for drier than normal weather in Brazil and Argentina.

So even if La Nina arrives too late to affect the North American summer crop, it still could affect the following Southern Hemisphere crops.

However, if La Nina fails to develop and there is benign weather, then the disappointing crop values that AgResource expects could be around for a while.

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