Macquarie Agri View La Niña’s impact on South American grain & oilseeds ::Macquarie Research,

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Macquarie Agri View
La Niña’s impact on South American
grain & oilseeds
Feature article
 We highlight in this report our current view of the building La Niña weather
phenomena and discuss the impacts this event could have on South
American corn and soybean production. Current expectations are of a mild to
moderate La Niña (-0.5 < SST anomaly < -1.0) during Q4 2011. In sum the
likely impact of this weather event will be for Brazilian soybean yields to once
again outperform trend and conversely Argentine corn yields will be likely to
underperform trend. The implication for the global soybean market fits in with
our current thesis that soybeans will remain the laggard of the grain and
oilseed complex continuing to trade at a historically tight ratio to corn prices.
The signs are more worrying for the corn market as the world is increasingly
reliant on EX-US corn supplies due to the restrictions in US production. The
projected drop in Argentine yields will see a shift lower in their export
potential; this implies corn supplies from the Ukraine and Brazil will be
increasingly important. Looking at the historical impacts of a mild to moderate
La Niña on the South American crops, we see the typical yield
outperformance for Brazilian soybeans could lead to a production of 77.3mt
and the typical yield underperformance for Argentine corn could lead
production down to 25mT. In summary this analysis shows that weather risk
still remains a pertinent issue for production in the 11/12 season and the
continued strengthening of the La Niña could further shake the world’s grain
and oilseed markets.