An emergence of El Nino phenomenon could affect global agricultural yields and alter trade flows in the 2023-24 season, according to agricultural bodies, meteorological agencies and trade analysts.
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The US Climate Prediction Centre said June 8 that weak El Nino conditions were observed across equatorial Pacific Ocean. The agency claimed there were 56% chances of the conditions strengthening during November-January.
In the meantime, the Australian Bureau of Meteorology on June 6 stepped up its probability forecast to "El Nino Alert" from "El Nino Watch", indicating higher chances of an El Nino forming in late-2023.
El Nino 's probability is measured by warming of the surface waters in equatorial Pacific Ocean and the phenomenon leads to higher chances of lower rainfall, including drought in India, Southeast Asia, Australia, and the northern areas of South and Central America.
The last strong El Nino phenomenon occurred during 2014 to 2016 and brought drought in Australia and forest fires in Indonesia.
"In the case of South America, the association was mixed. In Chile on the western coast and Uruguay etc. on the eastern coast, the major effect was of excessive rains. In Argentina and central Brazil, the effects were unclear," the UN Food and Agriculture Organization said in a report April 27.
- Australia's wheat exports are likely to decline due to an anticipated drop in harvest. ABARES has pegged Australian wheat exports in MY 2023-24 at 21 million mt, down 29% on the year.
- Argentina's wheat shipments are expected to pick up in MY 2023-24. The country will likely ship out 13.5 million mt, up from 5 million mt in the previous year.
- Platts, part of S&P Global Commodity Insights, assessed Australian premium white wheat FOB prices at $290/mt on June 14, up $4/mt on the day.
- Platts assessed Australian standard white wheat FOB prices at $264/mt June 14, up $3/mt on the day.
- Argentina is estimated to harvest 48 million mt soybean in MY 2023-24, nearly doubling on the year from 25 million mt in the previous season, the USDA said.
- Brazil soybean output is also pegged to rise around 4% higher on the year to 163 million mt in MY 2023-24, the USDA said.
- Argentina and Brazil are the world's largest exporters of soybean oil and meal. Brazil is also a major supplier of raw soybeans.
- Increased availability of raw beans is also likely to push up crushing in these countries. Argentina's soybean crushing is projected to increase 20% on the year to 36 million mt. In Brazil, raw bean processing is estimated to rise 4.2% over the year to 55.75 million mt.
- The increase in soybean production and crushing is also likely to boost global availability of soybean derivative in MY 2023-23.
- Global soybean meal production is expected to rise by over 6.18% on the year to 260.54 million mt. Soybean oil output will likely rise to 62.4 million mt, against 58.7 million mt in the previous year.
- Brazil raw soybean export is estimated to rise 4% on the year to 96.5 million mt for MY 2023-24.
- Argentina's soybean meal shipments are pegged at 24.3 million mt, up 15.2% on the year while oil exports are projected at 4.5 million mt, up 20% on the year.
- Soybean meal exports from Brazil were also expected to increase slightly to 21.8 million mt from 21.65 million mt in the previous year.
- Platts assessed Soybean meal Brazil FOB Paranagua at $432.87/mt on June 14, down $13.01/mt on the day. Soybean oil Brazil FOB Paranagua was assessed at $947.11/mt on June 14, down $10.36/mt on the day.
- Platts assessed Soybean meal Argentina FOB up river at $442.79/mt June 14, down $9.7/mt on the day.
- A mild El Nino could reduce Malaysia's palm oil production by 10% while a severe one could pull it down by as much as 20%, the Malaysian Palm Oil board said in May.
- In Indonesia, drier weather caused by the El Nino phenomenon may lead to forest fires and threaten harvest, the head of its weather agency said June 6.
- Malaysia's palm oil yield may drop 23% due to prolonged dry weather, based on past track record, UOB Kay Hian analyst Leow Huey Chuen said.
- The US-based Foreign Agricultural Service lowered the world's palm oil production outlook to 79.26 million mt for MY 2023-24 (October-September) on June 9, from 79.56 million mt a month ago.
- The effect of an El Nino event this year on production and trade could get more pronounced in 2024, analysts reckoned, as oil palm trees are resistant to water stress, but extended droughts will weigh on yields and quality of fruits.
- Global exports of palm oil in MY 2023-24 were revised lower by the FAS in June to 51.13 million mt from 51.33 million mt, largely on lower exports from Malaysia.
- Indonesia's palm oil exports in MY 2023-24 are seen at 28.4 million mt, lower than its MY 2022-23 exports of 28.45 million mt, according to the FAS.
- Platts assessed Crude Palm Oil FOB Indonesia at $810/mt on June 14, up $14/mt on the day.
- On the destination side, Crude Palm Oil CFR West Coast India was assessed at $862/mt on June 14, up $22/mt on the day, while Crude Palm Oil CIF Rotterdam was assessed at $875/mt, down $2.5/mt on the day.