February data released by the National Oceanic and Atmospheric Administration (NOAA).
The La Niña phenomenon continues to develop
There is a 77% chance that this will develop during the spring period
That's from March to May
And in the summer there is a 57% chance of remaining neutral
Trace it back from historical data
Despite the occurrence of abnormal weather in the year for global soybeans, corn,
Crops such as wheat and cotton have caused irreversible yield reductions
But if you look at it from the perspective of years
In the past 3 years, the impact of weather on crops has become less and less
But it is undeniable that it is a critical period for crop growth
It remains one of the most uncertain factors in market trading
Maize and wheat have experienced significant losses in the years of La Niña
And the price of the US market is also reflected very thoroughly
However, the impact on the domestic market is minimal
Due to the higher expected global soybean production
The reduction in production in South America may be higher than expected
But global production still rebounded slightly year-on-year
Impact projections on maize: The impact on global yields is limited
Among the world's major corn producers, the United States, China and Brazil are in the top three, followed by the European Union, Argentina, Ukraine and Mexico. The United States is the world's largest exporter of corn, exporting 70.49 million tonnes of maize in 2020/2021, accounting for 19.57% of its total production and 39.5% of total global exports.
The impact of the La Niña phenomenon on global maize production is divided into two aspects: First, from the perspective of production, in 1998/1999, 2005/2006, 2010/2011 and 2015/2016, global maize production increased by 0.25%, 2.04%, 6.5% and 15.55% respectively, basically no decrease, but the US corn production reduction was very significant, with the first three years reducing production by 3.36%, 5.25% and 0.71% respectively. Second, from the perspective of prices, the price increase or decrease of U.S. corn in the four years fell by 11.21%, rose by 26.24%, rose by 58.91% and fell by 4.92% respectively.
CBOT corn prices did rise sharply in the two U.S. corn production years of 2005/2006 and 2010/2011, although prices correlated relatively little with global corn production. For the mainland, because domestic corn is basically self-sufficient and has policy adjustments, the domestic impact of changes in international corn production and prices is not as great as that of oil crops such as soybeans and rapeseed. In these four years, only the domestic corn production in 2015/2016 was reduced by 0.52%, but the corn futures price fell by 21.71% that year.
Deduction of the impact on wheat: the US production cut is larger
Wheat is the world's largest sown area, the largest yield, the most widely distributed food crops. The European Union, China and India account for only half of the production, and Russia, the United States and Australia are also the main producers, due to natural conditions and land area constraints, etc., the wheat planting area and yield of each region vary greatly. Wheat has a wide range of types and varieties, wide distribution, strong adaptability to soil and climatic conditions, hardiness, drought tolerance, stable yield, high yield, but in the face of extreme weather, wheat production and price will still be affected.
In terms of production, in 1998/1999, 2005/2006, 2010/2011 and 2015/2016, global wheat production changes decreased by 0.45%, 4.13%, 7.7% and 2.88%, respectively, but the us wheat production reduction was more pronounced, with changes in production in the four years decreasing by 9.75%, decreasing by 14.07%, decreasing by 9.41% and increasing by 11.96%, respectively. In terms of prices, the price of wheat in the United States in the four years fell by 10.97%, rose by 26.22%, rose by 21.76% and fell by 14.11%, respectively. Clearly, the La Niña phenomenon in 2005/2006 and 2010/2011 had a greater impact on U.S. wheat, especially in 2005/2006, when global and U.S. wheat production was reduced, so prices rose even more.
The domestic wheat production increased by 3.78%, 11.31%, 1.93% and 2.37% in these four years, and the corresponding price increase and fall was 5.3%, 2.65%, 9.18% and 1.95%, and the output showed no signs of reduction, so the price was not reflected.
During the outbreak of the La Niña phenomenon, when the wheat production was sharply reduced, the basic price trend could still be roughly the same as that of the normal year, mainly because supply and demand were fundamental to determine the price of wheat, and the correlation with the strength of La Niña was not high, and the impact on it was not particularly obvious. On the whole, it is expected that the la Niña phenomenon will have a greater impact on maize than wheat.
Effects on soybeans are deduced
Global soybean production is mainly distributed in the United States, Brazil, Argentina and China. Over the past 10 years, the proportion of soybean production in the four countries in the global total production has always been more than 87%, and the concentration is very high. From the perspective of global soybean planting area, Brazil's planting area has shown a rapid growth trend since 2012, with an increase of 45.85% and an average annual growth rate of 4.3%, which has surpassed the United States to become the world's largest soybean grower in recent years. The soybean planting area in the Eu and India has not changed much in the past 5 years, and the growth rate is also general, mainly relying on imports and supplies.
Looking back at history, it can be found that the impact of the relatively large La Niña phenomenon on the yield of U.S. beans after 1998 has gradually weakened, although the reasons are not very certain, but it can be largely attributed to the improvement of planting levels and varieties. Brazilian soybean yields are not necessarily related to la Niña, and the impact is difficult to define. What is more certain is that Argentine soybeans are most likely affected by the La Niña phenomenon and the yield reduction occurs, which brings a relatively large market, but the strength of the La Niña phenomenon and the amplitude of the yield reduction are not always a very clear linear correlation.
The world's main soybean producing countries: the growth rate of production has dropped significantly
Judging from the comparison of data before and after the outbreak of the La Niña phenomenon in history, the growth rate of soybean production in major producing countries around the world has slowed down significantly during the El Niño phenomenon to la Niña phenomenon, and there will be a rebound in the following year. In terms of production, the growth rate of global soybean production in 1998/1999, 2005/2006 and 2010/2011 all showed a significant decline. It is worth mentioning that although the 2015/2016 year is a strong El Niño phenomenon, the la Niña phenomenon behind it is only neutral, so although the impact on Malaysian palm oil in that year is large, the reduction in production from the perspective of soybeans is not obvious.
From the perspective of yield by country, it can be clearly seen that the ENSO conversion in 2010/2011 led to a reduction in the production of all the major soybean producing countries in that year, and the average reduction rate was more than 10%, which can be said to be the most affected by the reduction. In 1998/1999, 2005/2006 and 2010/2011, the growth rate of soybean production in Argentina was 2.56%, 3.85% and -18.16% year-on-year, respectively; the growth rate of soybean production in Brazil was -3.69%, 3.51% and -11.69% year-on-year, the growth rate of production in the United States was -3.19%, -1.93% and -7.09% year-on-year, and the growth rate of China's production was -5.68%, -2.32% and -4.04% respectively. The La Niña phenomenon in 2015/2016 only led to a 3.17% year-on-year reduction in Argentine soybean production, and the impact on the remaining three countries was not obvious.
Combined with the local soybean planting cycle in the major producing countries, the frequent occurrence of dry weather during the outbreak of la Niña is the main reason for the decline in soybean production levels and the decline in yield growth. In the El Niño and La Niña phenomenon conversion year, the west coast of South America is affected by the La Niña phenomenon, the climate is dominated by high temperature and dryness, which can meet the accumulated temperature and sunshine hours required for soybean growth, and it is also conducive to soybean pods and drum grains, and the yield level of soybeans has been significantly improved; while the United States and China have insufficient accumulated temperature during the flowering-pod period due to precipitation and low temperature weather caused by the La Niña phenomenon, and the yield has been reduced. In the following year of la Niña, the climate in China and the United States was characterized by low temperature and rain, hail and other weather occurred during the summer soybean sowing period, and low temperatures and continuous rainfall in autumn and winter could not effectively meet the accumulated temperature and sunshine time required for soybean growth, so it was not conducive to soybean growth.
The global soybean price of the La Niña vintage is likely to rise
Looking back at the La Niña years of abnormal weather in previous years, although dry weather has an impact on production, the impact on prices is very different. During the four outbreaks of La Niña, soybean prices have risen and fallen sharply. The difference is that soybean prices in 1998/1999 were dominated by declines, with the largest decline of 48.95 per cent, while in 2010 soybean prices were dominated by increases, with a maximum increase of 48.6 per cent.
The average price of soybeans in 1998 was $5.98/bushel, down 18.58% from the previous year, and the average price of soybeans in 1999 was $4.79/bushel, down 20% from the previous year. The average price of soybeans in 2010 was $10.03/bushel, up 4.52% year-on-year; the average price of soybeans in 2011 was $13.18/bushel, up 25.82% year-on-year. The average price of soybeans in 2005 was US$6.16/bushel, down 15% from the previous year, and the average price of soybeans in 2006 was US$6.01/bushel, down 2.4% from the previous year. The average price of soybeans in 2015 was $9.38/bushel, down 22.48% from the previous year; the average price of soybeans in 2016 was $9.85/bushel, up 5.02% year-on-year.
The impact of the La Niña phenomenon on soybean prices is mainly reflected in two aspects: First, the gap between production and demand caused by the outbreak of extreme weather has widened, causing large fluctuations in soybean prices. From 1998 to 1999, affected by the global economic crisis, global commodities, including soybeans, were in a downward price channel, so prices showed an overall sharp decline. Second, the outbreak of extreme weather will form an expectation of declining production, resulting in large fluctuations in soybean prices in the short term, and the 2011 La Niña phenomenon pushed up global soybean prices, which truly reflects the gap between supply and demand in that year.
From the perspective of weather conditions, 2021 is a strong El Niño to La Niña year, compared with the historical situation during the outbreak of La Niña, the probability of slowing down the growth rate of soybean production in 2021/2022 is larger. However, the La Niña phenomenon is actually not very strong in terms of duration and intensity, at most it is a neutral La Niña phenomenon. Data from the USDA's February Monthly Supply and Demand Report shows that global soybean production is expected to be 363.86 million tonnes in 2021/2022, down 0.65% from the previous year. The current round of El Niño-La Niña has caused concerns about production cuts in South America, but the decline in global soybean production is expected to be limited due to the sharp rebound in overall sown area and yields this year. In terms of prices, the center of gravity of global soybean prices is expected to continue to move upwards, but it may be difficult to reach the 2012 high.
Source 丨 Futures Daily
Editor 丨Nong Caijun
Contact Nongcaijun 丨 18565265490