The weather setbacks to the US corn crop may not end with the easing of heat and dryness – with the too much moisture at harvest time potentially a
problem, thanks to the El Nino weather pattern.
The US Department of Agriculture is expected later on Monday
to reveal a further decline in the condition of domestic corn and soybean crops,
thanks to hot and dry weather last week.
"We would expect condition numbers to keep sliding lower, as
it has been a brutal week in almost the entire Corn Belt," Mike Mawdsley at
broker Market 1 said.
However, even corn which made it little-damaged through the
adverse weather – more typical of the La Nina pattern – into the cooler temperatures now expected may suffer later in the year from
harvest-time setbacks if there is a switch to El Nino conditions, as many
indicators suggest, Macquarie said.
Official forecasts in Australia, New Zealand and the US have
warned of increased chances of the onset of an El Nino, linked to warm Pacific
"Most weather models reflect increased chances for El Nino
beginning in the July-to-September period," Macquarie said.
"Indications are that we will be in a moderate El Nino for
the remainder of summer and autumn into this winter."
In the US, El Ninos have historically tended to bring cooler
and wetter weather "as we move into winter", the bank said.
"If rainfall starts early, this could hamper harvesting
activity due August-to-October."
In the last El Nino period, which started in 2009, the US corn
harvest was greatly delayed by excessive moisture, which forced some fields to be
carried over for combining after winter, and which delayed spring sowings too.
'Bullish for sugar'
Some initial effects of the El Nino may already be evident
in India's weak monsoon, which has suffered a 30% shortfall in precipitation so
far, and the heavy rains hurting sugar cane harvesting and coffee quality in
"El Ninos are typically bullish for sugar," Macquarie said,
warning that the weather pattern would likely "lead to above-average rainfall
in southern regions [of Brazil] for the remainder of the cane-crushing season".
However, for Argentine and Brazilian soybean farmers, El
Nino rains could boost yields – depending on their timing.
"Additional rainfall could be very good if they arrive
before the plantings window in the October-to-December quarter by providing
"This risk is that heavy rains could delay plantings."
Coffee, cocoa, wheat
For coffee, the El Nino could have a variety of effects
outside Brazil, including drier weather in Colombia, which may already be
evident in recovering production data following months of rain-effected
In Vietnam, the weather pattern "may return in a drier-than-usual
climate" for cherries to develop in.
For cocoa, El Nino events "tend to be, on balance, bullish",
Macquarie said, echoing comments from Rabobank, while wheat investors should be
aware of "a risk that below-normal precipitation returns to Australia this
Shorter-term, Luke Mathews at Commonwealth Bank of Australia
said that "excellent rainfall is forecast throughout much of the Australian
grain belt this week".
Official meteorologists were predicting that "25mm-50mm will
fall in New South Wales and Victoria while more modest falls are expected in Western
Australia, South Australia and Queensland".