An El Nino, while a curse for many farmers, might prove a blessing for global soybean production – meaning the crop could be the only major agricultural commodity to miss out on a market rally.

The onset of El Nino weather disruption would, by denting production of most farm commodities, be a "bullish factor for world agricultural prices into 2010", Rabobank analyst Luke Chandler said.

"The emergence of an El Nino... may destabilise the [crop] inventory rebuilding that has been taking place since 2007," he said.

However, the weather pattern may help global soybean output if it breaks the prolonged dry spell in Argentina, historically one of the world's major producers.

"An emerging El Nino is welcome news to farmers in Argentina and southern Brazil, where above average rainfall is expected in the second half of 2009," Mr Chandler said.

Argentine recovery

He forecast an Argentine soybean harvest of 52m tonnes in 2009-10, 1m tonnes higher than official US estimates and 20m tonnes better than the drought-afflicted 2008-09 crop.

Beside the improvement brought by rain to yields, production would also be raised by higher plantings in the sowing season, which takes place at the end of the calendar year.

A slump in current wheat plantings, because of dry weather, has freed up more land for soybeans when rains do arrive.

"Soybeans is the only market where a net gain is expected for production, with a rebound in South American production likely to be bearish for world prices," Mr Chandler added.

'Disastrous' effects

The report added that the onset of an El Nino later this year, which Australian weather forecasters believe is probable, would threaten wheat production in Australia, coffee and palm oil output in South East Asia and cocoa bean harvests in both South East Asia and West Africa.

In Australia, El Nino often brings drought, and proves "disastrous" for winter wheat, which has this year got off to a good start.

"The risk for Australian wheat production is that the crop develops early and then the crucial heading stage is met with a lack of rainfall," Mr Chandler said.

The damage caused to Indonesia and Malaysian palm oil output by El Nino can send prices rising by 60%, he added.