Freese-Notis: La Nina in Argentina Could Boost Beans
With temperatures averaging more than eight degrees below normal over much of the nation’s midsection, December, 2000 will most likely go into the record books as one of the coldest ever, according to
Craig Solberg, with Freese-Notis, one of the nation’s leading crop weather forecasting services, based in Des Moines, Iowa.
Speaking at the Prairie Grains Conference in Fargo in early December, Solberg predicted that:
• January would see above normal temperatures, February slightly lower to normal, and March lower.
• From Dec. 1 to Feb. 28, precipitation in the Northern Plains would be less than normal (75-100% from the average) and above normal in the Southern Plains.
• We shouldn’t be surprised to see a La Niña form. If it does, there could be problems for the Argentine soybean crop. If it doesn’t, the Brazilian bean crop may see problems.
• Going into dormancy, winter wheat is a “mixed bag,” with conditions in the High Plains highly uncertain. A major Midwest drought “is very overdue.”
Fast forward a month, and while Solberg has revised his long-range forecast for March—now, he predicts it’ll be two to four degrees higher than average—he’s still holding to his other predictions.
In Freese-Notis’ monthly “Trade Winds” newsletter, Solberg notes that the Climate Prediction Center “officially” announced the return of La Niña conditions on Dec. 11, and that Freese-Notis believes that
the greatest odds for weather problems through February will be in Argentina, not Brazil. Brazil typically has their worst weather conditions when neither El Niño nor La Niña is present, he says.
“While the development of La Niña lowers the odds of crop problems in top producer Brazil, it raises the odds of problems for Argentina. Right now we would put the odds of crop-damaging drought in
Argentina at about 50-50,” says Solberg.
Argentina typically has weather problems during a La Niña . A La Niña of similar strength in 1995/96 resulted in Argentine soybean yields about 13% below the long-term trend, while Brazilian yields were
right at the long-term trend, he points out. If one uses current USDA planted acreage estimates, similar yields this year would equate to a crop of 33.5 million metric tons in Brazil and 20 MMT for Argentina. The
current USDA forecast is for crops of 34.5 and 23 MMT, respectively.
Now, the soybean market is still bearish. The USDA currently is forecasting record-large crops for the United States, Brazil, and Argentina, but at the same time is forecasting a decline in world soybean
ending stocks. World carryout levels would go to exceptionally tight levels with just a modest cut in soybean production.
“Putting our production figures into the world soybean supply/demand balance makes for a very tight situation,” says Solberg. Generally speaking, when declining crop estimates are encountered one normally
sees usage estimates fall. However, considering the increased meal demand for Europe and the insatiable demand for soybeans in the Far East, “we tend to believe that soybean demand would remain strong no matter how
small crops might get. We would project that a 13% cut in Argentine soybean yields, and normal yields in Brazil, would project world ending stocks below 19 MMT, a figure not seen since 1996/97. Our stocks to usage
ratio would also be the lowest since 1996/97, and moreover would be the second lowest in history. Our figures only serve to solidify arguments that the soybean market would have huge upside potential—if South
American weather problems can develop.” Stay tuned.