A look at the impact of the La Niña episode in South American

By Scott Irwin, Department of Agricultural and Consumer Economics at the University of Illinois

There is considerable discussion about the potential impact of the current La Niña episode on South American growing season weather and the resulting effect on crop yields. We define a La Niña episode as one in which the actual three-month running mean temperature falls below the long-run average temperature by at least 1.0 C for at least one month during July through December. There have been 11 La Niña episodes over January 1977 through October 2020. On average, La Niña episodes of this type have occurred once every four years. 

The pattern of average corn and soybean yields in years following a strong pre-season La Niña episode provides mixed information for yield expectations. For Brazil:

  1. The average corn yield in the 10 years was 0.7 bushels below trend. The average soybean yield was 0.8 bushels above trend.
  2. The deviation from trend for corn ranged from -7.5 bushels to 6.0 bushels. The deviation from trend for soybeans ranged from -4.6 bushels to 3.9 bushels.
  3. The average corn yield was below trend 50% of the time (five years), and above trend 50% of the time. The average soybean yield was below trend 30% of the time (three years) and above trend 70% of the time.
  4. Of the bottom 10 years below trend for corn since 1978, two followed a strong La Niña episode. Of the top 10 years above trend for corn since 1978, one followed a strong La Niña episode.
  5. Of the bottom 10 years below trend for soybeans since 1978, one followed a strong La Niña episode. Of the top 10 years above trend for soybeans since 1978, two followed a strong La Niña episode.
  6. La Niña episodes occurred in seven years from 1989-2020. The average first crop corn yield in those seven years was 0.6 bushels below trend. The average second crop corn yield was 3.6 bushels below trend. Yield was below trend following five of the seven La Niña episodes for both first and second crop corn. Furthermore, three and four of the bottom 10 trend deviations followed La Niña episodes in first and second crop corn, respectively.

For Argentina:

  1. The average corn yield in the ten years was 7.7 bushels below trend. The average soybean yield was 2.2 bushels below trend.
  2. The deviation from trend for corn ranged from -25.5 bushels to 4.2 bushels. The deviation from trend for soybeans ranged from -8.5 bushels to 4.8 bushels.
  3. The average corn yield was below trend 70% of the time (seven years), and above trend 30% of the time. The average soybean yield was below trend 60% of the time (six years) and above trend 40% of the time.
  4. Of the bottom 10 years below trend for corn since 1978, five followed a strong La Niña episode. Of the top 10 years above trend for corn since 1978, none followed a strong La Niña episode.
  5. Of the bottom 10 years below trend for soybeans since 1978, four followed a strong La Niña episode. Of the top 10 years above trend for soybeans since 1978, one followed a strong La Niña episode.

With current U.S. and world corn and soybean supplies relatively tight, the size of the 2021 Brazilian and Argentine crops will be very important in determining the direction of crop prices over the next year or more. The history of corn and soybean yields in Brazil and Argentina conditioned on a strong La Niña episode, such as the one currently underway, provides some useful information about the direction and magnitude of the trend deviation to expect in 2021. Perhaps the most important finding is the slim chance of unusually good corn and soybean yields in either country following a strong La Niña episode. 

In Brazil, first crop corn and national soybean yield appear to have minimal risk of yields substantially below trend. There is enhanced risk of below trend yield for second crop corn in Brazil, with an average trend deviation of -3.6 bushels. The most notable yield impacts historically are observed for Argentina, where the probability of below trend yields is 60% to 70% following a strong La Niña episode. The average trend deviation is -7.7 bushels for corn and -2.2 bushels for soybeans.

We estimated 2021 trend yields for corn and soybeans in Brazil of 94.9 and 50.4 bushels per acre, respectively. Given the ongoing strong La Niña episode, we would not change the soybean yield expectation for Brazil but believe it would be prudent to drop the corn yield expectation 1 to 2 bushels below trend. We estimated 2021 trend yields for corn and soybeans in Argentina of 127.4 and 44.1 bushels per acre, respectively. The analysis suggests lowering the corn yield expectation by 7 to 8 bushels below trend and the soybean yield 2 to 3 bushels below trend. If cuts in yields of this magnitude are realized, total corn and soybean production in Brazil and Argentina for 2021 would be reduced over 200 and 100 million bushels, respectively.

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