Tranquil world weather raises production debate

by Drew Lerner
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ranquil world weather raises production debate
Dryness is certainly expected in the United States this summer, but will it be a 2012 style drought?

KANSAS CITY — Many years ago in the height of Wendy’s Co. attempt at burger dominance there was a commercial with a little old lady looking at the inside of a competitor’s hamburger and exclaiming “Where’s the beef?” That was in response of trying to heighten awareness that if you are going to call it a hamburger the sandwich needs more meat in it and, of course, Wendy’s was going to provide that in their sandwiches.

Drought mongers have become a dime a dozen this spring. It is hard to find someone who either is not predicting a hot, dry, summer or is willing to suggest that summer 2016 may not be quite the disaster some have called for. Well, the buck stops here! World Weather, Inc. wants to see “the beef.” Oh, do not get me wrong, there will be some heat and dryness this summer, and it very well may harm yield potentials in a part of the United States, but will it be enough to throw the commodity trade into a frothy uptrend? As long as the world has hedge funds and there are drought mongers there is bound to be froth, but will it be sustainable? To answer that question we must take a look around the world and see the trends.

Inside Australia


Let’s begin in the opposite end of the world — Australia. Most El Niño events produce drought in eastern Australia. Of course that did not happen in 2015, but let’s pretend that we know what we are talking about and imply that “most” El Niño events lead to dryness issues in eastern Australia. The same research that
advertises drought in eastern Australia also suggests rainy weather occurs during La Niña events. Recent weather trends already have produced favorable amounts of moisture in Australia, and autumn planting is off to a good start.

Also favoring Australia’s production this year will be warm autumn ocean temperatures across the Indian Ocean, which will help feed subtropical moisture into Australia where it may lead to greater rain events as cold air masses come across the nation during the autumn and winter.

The result of these trends leaves Australia, especially the east, as an unlikely region of dryness in 2016 and perhaps early 2017, as well.

Europe and the western Commonwealth of Independent States are also not on a list for potential moisture and heat problems for this late spring and summer. Atmospheric conditions are poised to produce periods of notable rainfall and some cooler biased periods. This is a trend that was identified in August of last year, and so far the trend has verified quite well. It is expected to linger through most of the summer. Production declines in Europe and western CIS, if they are going to occur this year, are more likely to occur because of cool and wet conditions rather than hot and dry conditions.

Eye on eastern Russia, China

Just because western Russia, Ukraine and Europe do not have much of a threat of heat and dryness does not mean such conditions cannot occur in eastern Russia’s New Lands region and/or China. These would be two areas to watch closely for signs of heat and dryness in the summer of 2016. However, with that said, the preliminary circulation data seems to throw out China as a likely candidate for hot and dry weather. There will be some tendency for drier and warmer biased conditions in southern parts of the nation for a while this summer, but it probably will not reach very far north into key grain or oilseed production areas.

India, like Australia, tends to see its worst weather during El Niño events with La Niña being much kinder and gentler to the subcontinent. If tradition holds, India likely will see erratic rainfall in June and then much greater rainfall in late July and August. Just like Europe and the western CIS the largest problem India is likely to have will be from getting too much rain at times instead of not getting enough. Northern India will be wettest relative to normal for most of the summer — except June.

Sizing up South America, Asia

South America’s weather does trend drier during La Niña events. The dryness is normally an Argentina, Uruguay and far southern Brazil event, but it has varied greatly from year to year and — most importantly — it tends to be a feature that affects the region in the fourth quarter of the year in which La Niña begins and is most significant in the first quarter of the New Year. That does not bode well for a frothy, sustainable rise in commodity futures prices — at least not for the summer of 2016.

Southeast Asia is another victim of El Niño and nearly always suffers greatly under the influence of such conditions. La Niña events are much less threatening with rainfall occurring in abundance. There have been years when flooding during La Niña has been so significant that large regions of flooding have evolved that hurt production. But it seems damage done by excessive moisture is far less dramatic than that of a multi-month drought that usually comes only in association with El Niño.

Southeast Asia has been slow in getting seasonal rainfall this spring (Northern Hemisphere), but that is more the byproduct of lingering and diminishing El Niño events than to the development of La Niña. Once La Niña establishes, rain will be falling frequently.

Canada has been dealing with dryness for the past year, but it has not been continuous. Drought in western Canada tends to be associated with El Niño events, although it is not always there. Quite often the years that change from El Niño to La Niña start out dry in the west and trend wet. That trend has been identified once again in the past couple of weeks with serious dryness in western and southern Saskatchewan and portions of Alberta recently giving way to a couple of important rain events that have begun to change Canada’s Prairies moisture profile.

Typically La Niña events tend to generate rain in much of the Canadian Prairies, but when drought is a problem in the north-central United States, it does tend to creep over the border and into Manitoba and southeastern Saskatchewan.

Stop and look around

So, while looking for the “beef” in this year’s cry for drought and rising commodity futures prices we must stop and look around. Dryness “may” occur in a part of China and possibly the eastern CIS New Lands and a part of South America. But the South America dryness will occur in 2017 more than 2016, and China’s key crop areas may be outside of any dryness that evolves this summer.

And that brings us back to the United States. Yes, dryness and some heat are possible and perhaps probable this summer in a part of the nation’s production region. But given weather conditions in the remainder of the world it will have to be a 2012 style drought and heat wave to send commodity futures prices into outer space without the assistance of other major crop areas in the world. A rise in commodity futures prices should be expected given where prices have been over the past year, and a weather scare in the United States will certainly help to get the rising price theme under way with follow-up issues possible in South America and perhaps again in the United States during 2017.

In the meantime, given the amount of occasional cool weather that will be in Canada this summer and the fact that the summer’s high pressure ridge will have a hard time staying in one place leaves the door wide open for the dryness and heat problems to be transient and not persistent, giving opportunities for breaks in the pattern to smooth over some of the stress that will evolve. Dryness is certainly expected in the United States this summer, but will it be a 2012 style drought? That seems highly unlikely, and if it is only a drier biased summer with lower yields in some areas and average yields elsewhere, it can’t be a 2012 style drought. As a result, the run-up in commodity future’s prices may not have the sustainable energy that is needed to prove there is “beef” in the drought forecast. The disaster outlook from some may turn out to be more trickery using a little smoke and mirrors to create the feel of a blazing problem. It will be an interesting summer. Enjoy the ride!

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