So just how real is the prospect of an El Nino this year?
Ever more so is the answer, with the Australian Bureau of
Meteorology on Thursday extending the round of upgrades by official forecasters
(India, Japan, the US) to probabilities of the weather pattern kicking in this
And that echoed round in particular the sugar market, which is proving one of the more sensitive to El Nino fears.
That is a negative for sugar production in that the weather
pattern is linked to dryness to India and eastern Australia, and too much rain
to Brazil, the top producing country, hampering cane harvesting and diluting
There is actually a twist to the El Nino story, in that timings
may prove more complex than the simple "wet US, southern Brazil, dry Asia,
Australia, West Africa" rule of thumb implies.
MDA said that while "all signs point towards El Nino", which
is linked to warm Pacific water temperatures, "the onset of El Nino does not
translate into immediate global weather influences.
"The first areas to see effects will likely by South East
Asia and eastern Australia, which would tend to have drier conditions."
Dryness in northern Brazil, and heavy rains to the south, nearer
the main cane-producing area, would likely kick in "by late summer" northern
And "any direct effects in the US, especially in the main
crop areas of the Plains and Midwest, will likely take a little bit longer".
'Rains will have to wait
Still, for now, investors were happy to inject a little more
risk premium into sugar, especially as whatever the long-term forecast, dryness
in Brazil's key Centre South cane region remains a theme for now.
"The weather in Brazil remains important, and it was drier than
forecasts had implied over the weekend," Jack Scoville at Price Futures said,
adding that "mostly-dry conditions are expected for the next week.
"There are good chances that moderate amounts of rain will
be possible to provide a boost to crops, but those rains will have to wait
until April now."
Raw sugar futures for May added 0.8% to 16.97 cents a pound
in New York, getting extra help from positive Standard Chartered comments too.
In London, white sugar futures for May gained 0.8% to $453.60
But the Brazil dryness idea proved less able to support arabica coffee futures, which suffered
a little more profit-taking, ending down 0.6% at 175.30 cents a pound for May in
'Open the door for
As for grains and oilseeds, a delayed El Nino would in theory
by bullish for prices, in delaying beyond the summer the wetter and cooler conditions
it tends to bring – ideal for, for example, corn yields.
In fact, the last El Nino year, 2009, brought a bumper US
corn yield of 165.2 bushels per acre.
An earlier El Nino would also stand to ease the dryness in
the hard red winter wheat belt which
was highlighted by official crop condition data overnight.
The weather pattern "may open the door for heavier
precipitation in the southern Plains in the weeks ahead", Gail Martell at
Martell Crop Projections said.
However, for now "the forecast continues threatening for
drought," Ms Martell said.
"Following light showers this week, a warmer and drier
weather pattern would resume in West Texas and Oklahoma," the outlook for 6-10
days ahead shows.
"Extremely dry air would circulate up from the Mexico desert,
reducing humidity and raising temperatures in the south west US and including west
Texas and Oklahoma."
In fact, that is only one snapshot of the forecast for
Plains weather, which has been something of a moving target.
"We did see the GFS model go wetter in the Plains in the
overnight and morning run, but the midday run pushed the moisture in the April
2-4 period to eastern edge of the Plains," Darrell Holaday at Country Futures
"The overnight and morning models put pressure on the wheat,
but the midday model has brought it back to unchanged.
"The problem is that the models beyond seven days out are
flip-flopping very quickly" meaning there is "little confidence in them", Mr
Extra reasons for investors to keep faith with wheat included
a tender by Jordan for 150,000 tonnes of optional origin wheat.
Still, Jordan has a habit of tendering but not ordering.
And, as for the deterioration in hard red US winter wheat
revealed in US Department of Agriculture data overnight, that looks like it had
already been factored into prices in Monday's rally.
Profit-taking proved the order of the day, driving wheat
0.9% lower to $7.08 ¼ a bushel in Chicago for May delivery, if giving back only
a fraction of the last session's gains.
Paris wheat for May eased 0.4% to E213.00 a tonne, while London
wheat for May was unchanged at £169.75 a tonne.
Corn has had a
habit of following wheat of late, but there were other influences to factor
into this session too, with March 31 looming, and with it USDA reports on
prospective spring crop area and on quarterly grain stocks, as of the start of
In fact, there were some fresh estimates of what the USDA will
announce in US spring sowings, with crop scout Michael Cordonnier pegging corn
area at 92m-93m acres and soybean
plantings at 80m-81m acres.
Informa Economics trimmed its estimate for corn seedings by
some 300,000 acres to 93.03m acres, while cutting by 60,000 acres to 81.20m
acres its estimate for soybean plantings.
But the figures failed to tip the needle much, when the
market is already expecting corn area at 92.75m acres, and soybean sowings at
81.08m acres, according to a Reuters survey.
That indeed left corn following wheat, dropping by 0.7% to
$4.86 ½ a bushel for May delivery.
Talk over losses to the US hog herd, and therefore feed
demand, from porcine epidemic diahorrea virus (PEDv) hardly helped either, with
Rabobank pegging US pork production this year well below the USDA estimate.
Mr Holaday flagged "more discussion regarding the substantial
problems in China with hog prices, but also discussion that the PEDv is
beginning to have an impact and will become worse".
And that was a negative for soymeal, and therefore soybeans too.
Furthermore, there is still talk of US imports of Brazil soybeans,
a reflection of a US price which US Commodities said is "near a 3-year high
premium" to those in the South American country.
And of course there are the ever-present concerns about
potential Chinese cancellations of orders from the US, and Brazil, in the face
of negative margins.
"China continues to suffer from soybean indigestion," US
Still, Richard Feltes at RJ O'Brien noted that "there was
nothing today" on cancellations of Chinese orders, a factor "viewed as
supportive to beans".
March was, after all, meant to be the month that Chinese cancellations
ramped up, and it is nearly over.
Soybeans for May ended up 0.2% at $14.28 a bushel, with
soymeal adding 0.4% to $463.70 a short ton.
Back in New York, cotton
for May did far better, soaring 3.8% to 94.11 cents a pound, a two-year high
for a spot contract.
The jump was prompted by USDA data showing that ginners have
processed 12.87m bales of cotton in 2013-14, less than had been
The data fuelled ideas that the US crop last year was
smaller than thought, and that stocks at the end of 2013-14 may prove lower
than the 2.80m bales the USDA is currently factoring in.
Some analysts foresee a figure of about 2.5m bales which
would be the lowest in 23 years.