Weather agencies say La Nina is here, Olam says otherwise

15.11.2016

You would think that something as significant as a global weather pattern would be easy to spot.

But apparently not.

Official US forecasters say La Nina has arrived, and will stay throughout the winter.

However, taking a contrarian view, Olam International says it "completely rules that out".

"La Nina conditions are present and slightly favoured to persist through winter 2016-17," said US NOAA climate prediction centre.

It said there's a 55% chance La Nina will stick around through winter, causing the drought to persist in Southern California and regions in the South East and southern Plains to experience dry conditions.

La Nina is the inverse of El Nino, caused by Pacific cooling rather than warming.

It's "anticipated to be a weak, short-lived event," said Mike Halpert, deputy director of the Climate Prediction Centre, NOAA.

'La Nina-like characteristics'

In the tropical Pacific, some indicators such as cloudiness near the Date Line show La Nina-like characteristics, said Australian Bureau of Meteorology (BoM).

"Only one of eight models suggests the Pacific may briefly reach weak La Nina levels towards the end of 2016," said the bureau.

"A La Nina developing this late in the calendar year has only occurred once since 1980."

BOM said warmer than average sea surface temperatures to Australia's north suggest that some La Nina-like impacts may occur, even if an event does not fully develop.

Olam disagrees

Singapore-based Olam, a major agri-commodity trader, however, said there would be no La Nina this season.

"On the La Nina impact, despite what the market is saying, we completely rule that out based on all our leading indicators," said group finance director Neelamani Muthukumar.

Mr Muthukumar said the assumption was based on proprietary research in the area.

"We do track this very, very, closely," he said. "And we don't see a chance of a La Nina this season."

"So, I think any potential impact of even an average La Nina, we rule out," Mr Muthukumar said.

"At best it will be a very, very weak La Nina and most likely there will be no La Nina at all in this coming season."

 SLC Agricola positive

And La Nina matters for agriculture, tending to bring boons or busts for farmers, depending in which region and which crop they are growing.

SLC Agricola, one of Brazil's biggest farm operators, said the La Nina would be good for crops.

The company, which currently grows soybean and then plants second-crop cotton and corn said the formation of La Nina would bring favourable weather conditions.

"One of the factors worth reinforcing is the probability of the formation of the La Niсa phenomenon, which, as opposed to the El Niсo, historically brings higher precipitation to our operating region and, therefore, would reverse the situation seen in 2015-16 crop year," SLC Agricola said.

The probability of the phenomenon's occurrence is still greater than 55%, at least by February 2017, which should be followed by a neutral scenario, which also is positive for crop development, the company said.

But investors nervous

The La Nina phenomenon may, however, cause dry conditions in the southern Plains – a factor which is already an unnerving investors.

The latest official US Drought Monitor showed 37% of Oklahoma, a major winter wheat growing state, in drought.

In Kansas, the top wheat growing state, while the proportion in drought remains relatively low, at 11.7% it was up 7.5 points week on week.

"Traders should continue to monitor the warm and dry conditions across US hard red winter wheat country," said Terry Reilly at Chicago broker Futures International.


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