You Ain't Seen Nothing Yet?
My US weather chum, Gail Mertell, says that there are signs that a La Niña signal has emerged in the United States in recent weeks, even though officially ENSO-neutral conditions are said to be in effect.
"October-November rainfall has been virtually absent in the southern third of the United States, intensifying drought, while heavy rains have pounded the Pacific Northwest in recent weeks. Recently, colder temperatures have developed in the Midwest. These developments suggest a La Niña influence may be in play," says Gail.
Intriguingly it is almost 12 months ago to the day that UK soya prices bottomed and the market went up in virtually a straight line for 8 months solid barring a brief period of optimism in May, appreciating by GBP200/tonne from early December to the late August highs.
The catalyst then was La Niña slashing South American soybean production across the southern hemisphere summer. In Nov 11 the USDA was forecasting a Brazilian soybean crop of 75 MMT (it subsequently ended up at 65.5 MMT) and an Argentine crop of 52 MMT (eventually only 41 MMT), wiping around 24 MMT off world supplies if we also throw Paraguay into the equation (down from 7.6 MMT in Nov 11 to only 4 MMT at the bitter end).
If another full blown La Niña was to develop, with similarly devastating reductions in soybean production in South America again this year, then who knows where prices could end up? Given the already extremely tight projected US 2012/13 ending stocks and the fact that all America's exports are heavily skewed towards the front end of the season it could be Bachman Turner Overdrive that we are humming in the spring rather than Elton John.
