A streak of record-breaking grain and oilseed production years from the United States and Brazil has deeply depressed commodity futures prices along with some help from the China trade war. Weather conditions have been very good year after year for a while and traders and producers are looking for that one event to come along and disrupt the ongoing swelling of the world’s storage bins. December weather in southwestern Brazil has suddenly turned dry, and the commodity trade is wondering if this is the long awaited turn of events that is needed to bring back higher prices and greater volatility. World Weather, Inc. says no, it is not.
Drying dominated a large part of southern Brazil in the first 10 days of December. A huge area of well below average precipitation occurred Dec. 1-10 from the heart of Argentina’s crop country through much of Uruguay and Paraguay to Mato Grosso do Sul and Sao Paulo. Some lighter-than-usual rainfall also occurred in southern Mato Grosso. This is the first time that weather conditions in southern Brazil have been notably drier biased since seasonal rainfall began in September.
The abundance of early season rainfall and the excellent start for corn and soybeans in Brazil has many speculators thinking hard about whether this is the big turning point in a multi-year string of good-to-excellent production years in Brazil. Argentina, of course, had one of its worst droughts on record in 2017-18. The situation in that country will be many times better in 2018-19 even if rainfall is erratic and lighter than usual over the next few weeks.
Weather conditions already were trending much wetter in Argentina at the time of this writing and by our publish date most of the nation will have received significant rain removing Argentina from the worry list. Brazil, on the other hand, is still drying out. The trend will continue until Dec. 20, which is the earliest that this dry biased pattern can break down.
Topsoil moisture already was depleted in southern Brazil by Dec. 10. Some of its sandier soil does not hold water well and a little crop stress already was noted from western Parana and southeastern Paraguay to southeastern Mato Grosso do Sul and far western Sao Paulo. Subsoil moisture was still favorable in many areas in southern Brazil, but only crops in the heavier soil were not feeling the effects of the dry start to December.
Is the December drying an omen for lower production in Brazil? World Weather, Inc. certainly does not believe so. This break in the action was long overdue after weeks of frequent rain and the atmosphere needed a little rest. In the meantime, El Niño continues to struggle with its evolution, and that has limited its influence on South America weather, just like in the remainder of the world, despite the wetter bias that has been playing out recently.
El Niño certainly has not performed as those in the past with wetter biased weather occurring in eastern Australia Indonesia, Malaysia and New Zealand during November and early December. The coincidental rainfall abundance in Brazil and Argentina during October and November cannot be directly attributed to El Niño because of its lack of organization and strength. The recent drier bias is a little unusual for El Niño, but it has not been dry enough for a long enough period of time to blame the drier tendency on poorly developed El Niño conditions either.
It is interesting to note that the Southern Oscillation Index (S.O.I.) has been trending neutral to slightly positive for about six weeks. In a normal El Niño environment this index would be strongly negative. Without the strongly negative Southern Oscillation, there have not been any strong high pressure systems over Southeast Asia to induce drought over Indonesia, Malaysia or dryness in eastern Australia and New Zealand. There is an ongoing drought in eastern Australia, but it has been running independent of El Niño for the past couple of years and recent rainfall in the midst of the drought can be attributed to the lack of El Niño influence. For the same reason we must conclude that South America’s weather also is lacking a deep influence from El Niño and that raises the potential for Brazil to have some lighter than usual rainfall.
World Weather, Inc. believes El Niño will experience some opportunity for strengthening over the next few weeks, and as that evolves rain likely will return to Brazil’s key grain and oilseed production areas. The return of rain will begin in late December and increase in January. The resuming rainfall will be great for late season soybeans and corn, rice, coffee, cocoa and sugarcane, but it may not be the best timing for early soybean maturation and harvesting.
There may be more concern about rainy weather during the harvest than there is about dryness continuing too long. Most of our Trend Model work has suggested rain will resume in late December and become significant in early January. That is one of the primary reasons for our lack of long-term concern over dryness that is underway now. El Niño (even though it is a lackluster event) should offer some help in restoring favorable Brazil soil moisture.
In the meantime, our Trend Model also suggests that drier biased weather will be returning to Argentina periodically during the summer, and a close monitoring of rainfall and temperature data will be needed in that country. Argentina is not facing another drought year like last year, but there is potential for some dry pockets and a close monitoring of the weather there is also warranted.
The bottom line to this discussion is that Brazil summer production in 2018-19 is not likely to be seriously off from expectations and another huge crop is likely. Argentina’s production of corn and soybeans will be much better than last year, but perhaps not a stellar year.
Concern about El Niño for eastern Australia, Indonesia, Malaysia and New Zealand rainfall and production potentials is not likely to be as serious as that of previous El Niño events, but eventual drying is expected, and some crop stress likely will evolve, but that may not occur in a serious manner for yet another few weeks. Each of these crop areas should experience some periodic rainfall over the balance of December and into early January; although some of the resulting rainfall will be lighter than usual.
World Weather, Inc. continues to closely monitor El Niño and its association with the solar minimum. We are not going to write off this El Niño event until we pass the solar minimum by a few months. As we have noted previously, there is a strong relationship with El Niño events occurring immediately after the solar minimum is reached. The National Aeronautics and Space Administration continues to suggest the minimum will come in the first half of 2019. That leaves some potential for El Niño to be around in the Northern Hemisphere summer and that might have influence on India, Southeast Asia, Central Africa, Central America and northern South America with minor influences on North America.