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Analysts try to figure how El Niño might affect crop prices

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Analysts try to figure how El Niño might affect crop prices
 

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Analysts try to figure how El Niño might affect crop pricesOnline version

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by Inglés Facultad de Agronomía
1

Just as weather forecasters watch the movements of El Niño for hints of what ? s to come , analysts are doing the same as they assess the commodity markets .
The connection makes sense . The pattern known as El Niño " historically brings timely pushing up to U . S . agriculture east of the Rockies , " according to historical climatologist Evelyn Browning Garris .
Those rains also can contribute to big crops , pushing up supply and driving down prices across the grain and soybean markets .
But not all crops ? or rather , the prices for those crops and agricultural products ? react in the same way to El Niño , according to Christopher Narayanan , head of agricultural commodities at Societe Generale in New York .
For soybeans and soybean meal , the effect is quite bearish . ( Prices for August soybean futures closed at $9 . 502 on Thursday . )
" Specifically , we noted that the soybean market has a pattern of lower prices in the first few months following the event , " Narayanan wrote . " In addition , soybean prices are pulled down alongside soybean prices and follow an almost identical path over the 12 months after the shock . Soybean oil , on the other hand , takes a distinctly different path with prices rising for the first four months post - shock reaching a maximum 3% increase by month four , as Asian palm oil production is adversely affected and greater demand for soybean oil ensues . "
He noted a " similar " effect for corn , both in corn production and the grain markets . " Corn yields are usually improved in an El Niño , and prices tend to for the first few months only to recover slightly , then drop dramatically into harvest and then eventually recovering seasonally , " he said .
Other crop prices typically fare better .
" Wheat , a more global crop , sees support for the first three months as in eastern Australia are dramatically hurt due to drought conditions , " Narayan said .
Cotton also typically gets a bounce . " Cotton prices respond positively within the first month , increasing roughly 1% immediately , " he wrote . " ? Dry weather in India , the world's second - largest cotton producer and exporter , helps explain the rise in cotton prices during an El Niño event . "
That ? s good news for U . S . wheat and cotton producers , which have been coping with worldwide gluts of the grain and fiber .
Adapted from : http : / / www . agweb . com / article / how - might - el - nino - affect - crop - prices - naa - alison - rice /

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