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El Nino may return soon, hit Asian rice crops

Warm weather phenomenon could boost US corn and soybean production, but hurt nations in Southern Hemisphere

El Nino might be on tap for the middle of this year, a faster than normal reappearance, and the potential impact on global agriculture depend, partly on the timing of its arrival.

The phenomenon is the warm phase of the El Nino-Southern Oscillation (ENSO), which is characterised by sea surface temperature variations along the equatorial Pacific Ocean.

El Nino and its cold counterpart, La Nina, are known to alter global climate patterns whenever either is present.

La Nina concluded a short-lived run earlier this year, and several climate models and forecasters are flagging the possibility that El Nino - which last occurred early last year - could resurface in a couple of months. That would be much sooner than the typical hiatus of two to seven years between episodes of El Nino.

Many in the industry associate El Nino with disastrous weather worldwide and potentially damaging effects on agriculture, but this is highly dependent on the region and crop - some of them tend to benefit from the phenomenon.

There does not appear to be a significant relationship between the mid-year state of ENSO and corn or wheat production trends at the global scale - this is likely due to the wide geographical dispersion of grain-growing regions.

For corn, this observation holds true even when isolating the big three exporters - the US, Brazil and Argentina - which account for 75 percent of global corn trade.

These same three countries produce 82 percent of the world's soybeans, and El Nino seems to have a positive impact on worldwide production when the warm cycle is in place between at least March and September.

But the global output of rice, a staple grain in Asia, is decidedly cut down by El Nino as it presents unfavourable weather directly to its prime growing areas.

Even though wheat and corn are not concretely impacted either way by El Nino on the global level, its effects on the individual countries, and thus the global market, can be different, depending on the roles of each.

The US has not had a widespread weather problem during the summer growing cycle since 2012, which has allowed the country to turn out the four largest-ever corn crops in the following years.

The last three years also featured record soybean production, with considerable contribution from huge yields.

Statistically, it would seem as though the US is due for a tough growing season weather-wise, but if El Nino returns in time for summer, then this year may be less likely to present difficulties.

Not all climatologists agree over whether the ENSO cycle influences weather during the US corn and soybean season, but past El Nino-season results suggest there is a better chance for good crops than bad, as both temperature and rainfall patterns have generally been supportive.

Summers in which El Nino or El Nino-like conditions were present, or imminent, coincided with some of the best growing seasons in the US, including 1982, 1987, 1994, 2004, 2009 and 2014.

However, there have been a couple of years in the mix that were unfriendly to the US harvest - 1991 and 2002 - in which summer temperatures were too warm. Additionally, in 1991, planting was severely hampered by wet spring conditions.

PLANTING

As long as the weather cooperates through planting this spring, an El Nino occurrence this summer could be favourable for US corn and soybean yields. But there is always the chance that a 2002 situation arises, especially since some dryness is already spreading into the Corn Belt.

Producers in the Southern Hemisphere tend to be more challenged by El Nino than those in the West, as the phenomenon often curbs rainfall from India to Australia, and a quicker return to the warm ENSO cycle could add stress.

Indian wheat farmers rely on monsoon rains between July and September to have sufficient soil moisture to plant the crop when the rainy season ends.

El Nino's arrival often clips the end of the monsoon, leaving India - one of the largest producers and consumers of wheat and rice - drier by the time growing season begins.

But if El Nino comes sooner, which some forecasters think could be as early as June, the Indian monsoon might be reduced more significantly than in the past, placing heightened risk on the country's agriculture industry.

TAIL END

An earlier onset of El Nino may also affect Australia, as it may dry out the tail end of the country's wheat planting, which starts next month, and keep conditions dry through to harvest in December.

Most of Australia's worst wheat harvests were associated with El Nino's presence, though during the two strongest El Nino episodes - 1997 and 2015 - the harvest turned out relatively normal.

Australia is a key exporter of wheat and is coming off a record crop in 2016/17, stemming from optimal weather during the growing season. But some of the main producing regions in the eastern half of the country have turned very dry since then, and this places some extra pressure on rainfall in the near term before El Nino's potential visit.

Palm oil could also fall victim to the El Nino-driven dry trend in South-east Asia as it often slows output in the two main producers, Malaysia and Indonesia, especially if the warm cycle appears sooner rather than later.

Production of the tropical oil was not majorly impacted early on in El Nino's most recent run from late 2014 through early last year, thanks to sufficient rains from other climatic features, which also explained why Australian wheat did not suffer too much in 2015.

Malaysian palm oil output was at record high levels throughout the middle of 2015 but sharply fell off at the end of the year. Production stayed relatively suppressed throughout last year, sending supply to a six-year monthly low by this January.

Analysts and traders close to the Malaysian market last year noted that the lower levels of production, especially toward the end of last year, were likely attributable to the delayed impacts of El Nino.

Malaysian palm oil output rebounded this January, topping the previous two Januarys. But if El Nino returns this year and again weighs down the oil's production, there would not be much recovery time for the stocks, which could fall even further.

The writer is a columnist for Reuters.

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