El Nino could have a bigger impact on grain and oilseed markets than drought in Russia and Ukraine, which may be alleviated before the crucial spring growth period, analysts said on Wednesday.
“You can’t have a drought problem overnight,” David Hightower, president of research firm The Hightower Report, said of conditions in Russia and Ukraine.
Speaking at the Global Grain conference in Geneva, he said El Nino, however, could have far-reaching effects if it lowers palm oil output in top producers Indonesia and Malaysia.
A 10 percent drop in palm oil exports next year would require 4.7 million tonnes of alternative edible oils to be supplied for the world market, he said.
“We don’t know what the impact of El Nino is going to be but China and India are much more significant (consumers) than in the previous El Nino cycle.”
Tightening supply in oilseed markets could spill over into grains, adding to an expected recovery in corn as farmers cut back on planting, notably in Argentina, he said.
The impact of El Nino on the oilseed complex could be offset if extra rainfall in Argentina and Brazil, another feature of the weather cycle, boost soybean production.
The United States, the world’s biggest corn and soybean producer, is meanwhile facing the possibility of El Nino being followed by a La Nina pattern coupled with continued warmer-than-normal temperatures in the northern Pacific Ocean, Kyle Tapley, meteorologist with MDA Weather Services, said.
Such patterns in the past have led to U.S. corn and soybean yields of about 10 percent below average.
“The best guess at this point is that we’ll have less favourable weather for crops in the U.S. for the next growing season,” he said.
The crop weather outlook for Ukraine and Russia was improving as winter weather projections called for normal rainfall and warmer than normal temperatures, which could reduce frost damage, he said.
“Obviously spring rainfall is really going to dictate the crop but at this point we expect at least some improvement in the coming months across those areas.”
Autumn drought has already cut wheat sowing in Ukraine and it could lead to a 2016 crop of 18-20 million tonnes, down from 24 million this year, Sergey Feofilov, head of UkrAgroConsult said.
The forecast assumed beneficial rainfall as currently projected in November and December, and would still represent a decent crop, he added.