La Niña Stronger Than Super El Niño Is Coming…Possibility of Direct Hit...

La Niña Stronger Than Super El Niño Is Coming…Possibility of Direct Hit on Grain Markets;

El Niño Expected to Peak and Pass ‘Extreme Weather’ Baton to La Niña in First Half of 2016


r001-20160204The so-called “Super’ El Niño” phenomenon is having a huge impact on the world’s weather, and it is expected that when El Niño dies down, La Niña will follow immediately. It is also predicted that the coming La Niña will greatly impact the grain markets and this is becoming a growing concern.

The Wall Street Journal declared on December 23 that La Niña would come soon, and predicted it would have a critical impact on agricultural markets. La Niña is essentially the opposite of El Niño. However, El Niño is often followed by La Niña. For this reason, La Niña is called El Niño’s “sister climate phenomenon.” According to the Japan Meteorological Agency, La Niña events have followed 11 of the last 15 El Niño’s events.

It is already well known that El Niño-related impacts have been occurring around the globe. Although La Niña is less famous than El Niño, we should not underestimate the destructive power of La Niña. Erik Norland, Executive Director and Senior Economist of CME Group, said, “Prices for crops such as soy, corn and wheat can move around 50% more during a La Niña event.” He added, “The likelihood that the current El Niño peaks soon and turns into a potentially strong La Niña by late 2016 or early 2017 is something that participants in agricultural markets should track closely.”

When La Niña develops, it typically brings warmer-than-normal temperatures across the United States and South America, causing higher humidity in Australia, Papua New Guinea, Indonesia and Central America. La Niña also increases the likelihood of tropical cyclone formation in the Pacific Ocean.

BMI Research, a subsidiary of the global credit rating agency Fitch, sees La Niña as posing its biggest risks to corn, soybeans, wheat, sugar, cotton and coffee. In fact, over the 12 months following the confirmation of a La Niña in July 2010, wheat on the Chicago Board of Trade rallied around 21% and soybeans rose around 39%, while the benchmark sugar contract in New York was up 67%. The Wall Street Journal has reported that the impact of La Niña may not be limited to agriculture. The La Niña that lasted from 1988 through 2000 caused colder-than-normal winters in the U.S. and Canada, sending prices of natural gas higher.

Repoter Eun Hee Cho[]