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Agricultural markets globally are currently under multiple influences, least of which is weather. From August onwards, a wet weather phenomenon called La Nina has taken hold.
La Nina typically is caused by colder water temperatures in the Pacific Ocean which brings moist weather conditions to the Asia-Pacific region including South Asia and South-East Asia. However, the same phenomenon is a threat to South America as also southern parts of North America where it can reduce precipitation and create drought-like conditions.
Occurring after a gap of nine years, La Nina this year is expected to be a moderate one, which means the impact on crops would be modest. The weather phenomenon is already creating an impact on the production of crops such as wheat, corn, soybean, coffee, sugarcane, palm oil with concomitant effect on prices.
Global agricultural prices have shot up between 8 and 15 per cent in the last two months including wheat (up 14 per cent), maize (up 14.7 per cent), soybean (up 8 per cent) and sugar (up 9.3 per cent). Sorghum and barley have also moved up. All this follows risks to crop production in the southern hemisphere as well as dry conditions affecting winter sowing around Europe.
Awaiting rainfall
Scanty rainfall in Brazil is substantially slowing the planting of soybean crop and is seen impacting the development of sugarcane. Rains are necessary for the 2021 coffee crop too. razil is the world’s largest producer of sugarcane, soybean and coffee.
For South-East Asia, La Nina is usually positive. However, heavy October rains in Malaysia have slowed palm oil production. Combined with strong buying from China and India, palm oil prices have spurted above the psychological Ringgit Malaysia 3,000 a tonne. The ongoing precipitation will help improve palm yields after two quarters.
Closer home, weak La Nina conditions have generally been favourable for Kharif crops, with the South-West monsoon extending its tenure by three weeks this year bringing more precipitation in October. At the same time, prices of agricultural commodities such as pulses and oilseeds have in the last two months risen from their previous lows because of low harvest and tightening supply conditions, apart from the international price influences through the import route.
A general consensus among weather forecasters around the world is that the chance of La Nina continuing through the northern hemisphere winter is high. La Nina is sure to create a ‘great weather market’ in 2021.
The markets are already impeded by the Covid-19, growth slowdown and ultra-accommodative monetary policy. Weather aberrations are likely to further skewer the market. New Delhi must take cognizance of the emerging conditions.
(The writer is a policy commentator and agribusiness specialist. Views are personal)
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