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SAM Harvest Progress & La Niña/ENSO Outlook

Data for the February USDA report was released today and is considered by the trade as mostly uneventfully. The carryout on corn was increased this month due to a 25 million bushel decrease for corn used for ethanol production and U.S. soybean crush was cut by 15 million bushels bringing the ending stock estimate to 225 million bushels.

Another analyst group, S&P Global Commodity Insights has issued their 2023 acreage forecast. They anticipate U.S. farmers will add 2.2% more corn acres than last season bringing the to 90.5 million acres. Soybean acres are also expected to grow but by a small 0.6% which is similar to earlier outlooks. The recent pull back in some of the costs of key inputs such as fertilizer has fueled hope that corn could become more profitable than earlier thought. The next hurdle for corn prices is export demand. Since last year’s harvest, corn export bookings are down 43% from the previous year according to data from the U.S. Agriculture Department.

Weather in Brazil remains wet. This has slowed the soybean harvest to 9% completed vs 16% last year, while also delaying the 2nd crop corn planting. According to Ag Rural, 2nd crop corn (Safrinha) planting was 12% completed as of last week compared to 24% a year ago. Harvesting of Brazil’s first crop corn acres are also facing delays with 10% harvested vs 18% last year. Rain remains prevalent in the forecast which now calls for more widespread rains for the next 10 days and beyond. In light of the expected record soybean harvest in Brazil, U.S. soybean prices have remained strong, likely a result of the slow Brazilian soy harvest.

Crops in Argentina have received below normal precipitation throughout this growing season. Looking forward the next 10 days show only scattered chances of rainfall with forecasts for many key areas indicating little to no rainfall. The GFS model does offer some hope with better rains expected to return mid-month. Recent precipitation has been somewhat beneficial to the later planted crops and will help avoid further yield losses for the later planted crops but ultimately yields will be well short of earlier estimates.

Russian officials are claiming the European Union has not satisfactory fulfilled their commitment to unblock Russian ports as part of the Black Sea Grain Deal. Few details have been given but it’s believed that they are referring to various sanctions dealing with banking, and insurance as well as other industries that they claim are hindering exports related to those businesses. (Reuters)

In January the Climate Prediction Center (CPC) announced that water along the equatorial Pacific is showing some signs of warming up and has an 82% chance of moving into a neutral pattern by spring. World Weather CEO, Drew Lerner says, “It will take a period of a few months for the pattern to completely break down but in the process, we will have opportunities for breaks from the pattern that has been so prevailing. As La Niña diminishes, we will lose that persistent below-normal-precipitation bias.”

This transition is good news for producers in Argentina as well as U.S. winter wheat, California and the Southwestern U.S. Meteorologist Kirk Hinz, with explained, “Soil moisture going into spring is an understated but impactful driver of seasonal weather. If we start dry, it’s easier to end dry. If we go through the spring wetter, then we’re more likely to retain that kind of pattern.” These years of transition are unpredictable, but Hinz is able to draw some comparisons to 2012. “The year before was a La Niña and as we went into the summer of 2012, it was just below an El Niño. This isn’t one to one, but we are trending in a similar direction (towards a more ENSO-neutral pattern) and we are at a pivotal point over the next 30 to 60 days.”

The El Niño weather pattern means an increase in precipitation for the Southwestern U.S. and Plains, but the CPC has determined that there is less than a 40% chance that it will fully develop between June and August.”

There are other forces that influence weather patterns, one of which is the Pacific Decadal Oscillation (POD). World Weather CEO Drew Lerner is watching the POD for clues to upcoming outlooks. “A strongly negative PDO allows for more troughing to come into the west coast and if you put a trough of low pressure in the western part of North American, in the middle of the country, you put a ridge of high pressure. As of December, we were at 17 months in a row of what I call a strong, negative PDO. We haven’t had 17 months of strong negative PDO, and our recorded history goes back to 1950.” He cautions that although rain is likely this spring, but a negative PDO continues, the Midwest will likely “go right back into a drier bias during summer.”

“The PDO operates on a 25-to-30-year cycle and so since the late 90s it’s been in a cold and negative phase.” According to one study, from 2000-2021 was the driest 22 year period since at least the year 800. “We have to get the PDO to flip to at least a short-term warm phase to really capitaize on the moisture. While it’s quite negative right now I do see some evidence that it could possibly flip, if nothing else, to a less negative or even neutral phase by later this year.”

The first map shows the expected precipitation through Monday. The following 2 maps give the 6-10-day outlooks for temperature and precipitation.

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