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How El Nino's effect in Brazil could give advantage to China in trade war

Bloomberg/ 09 Nov 18 | 04:01 PM

The weather is favouring China in its trade war with the US.

Thanks to the El Nino phenomenon, Brazil may be able to supply more soybeans than usual in January, helping feed China’s appetite for the oilseed as buyers in the Asian nation snub made-in-America crops. Japan’s weather agency said on Friday El Nino had emerged and it sees a 70 per cent chance of the event continuing through spring.

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Conditions were favourable in early planting in Mato Grosso, Brazil’s top soybean-producing state. The outlook also bodes well for the second half of December, when the harvest of early varieties starts, Celso Oliveira, a meteorologist at Somar in Sao Paulo, said by telephone. El Nino signals lighter and shorter downpours in the December-February harvest.

“We may see some rains, but with favourable sunny days to reap soybeans and to plant the second crop," Oliveira said.

In the first nine months of the year as U.S.-China trade tensions escalated, Brazil shipped 15 per cent more soy to China than it did in all of 2017, according to Brazil Trade Ministry data.

With seeding in Mato Grosso almost done, farmers may start collecting beans from the new crop before Christmas rather than right at the end of the year as they do normally, Daniele Siqueira, an analyst at Curitiba-based AgRural consultancy, said by phone. That means more of the oilseed will be harvested by the end of January than normal.

“As the seeding pace is at record levels, we’ll probably see above-average volumes harvested in January if the weather’s favourable for field works," she said.

Farmers able to deliver soybeans in January tend to get better prices than in subsequent months. In October, producers sold soy for delivery in January at prices as much as 2.8 per cent higher than for delivery in February, Siqueira said.

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