Rains rally Asia crops in El Nino year, but relief seen short-lived

Reuters: Surprisingly strong rains in an El Nino year, typically marked by droughts in parts of Asia, have eased concerns of a lower crop output in the region. But weather forecasters are not convinced, warning of severe dryness in the autumn months.

The last El Nino in 2009 had brought the worst drought in four decades to India. It hit Australian wheat crop and also reduced oil palm yields across Southeast Asia. While the forecast is for an equally severe dryness this year, recent rains have buoyed farming in India, China and Australia.

“Indian monsoon (started in June) is on track, in fact it has been better than expected, and we haven’t seen any decline in rainfall in a serious manner in Malaysia or Indonesia yet,” an Australia-based commodity fund manager said, declining to be identified to avoid speculation over the fund’s investments.

“Australia is dry but we have received some rains on the east coast,” the fund manager added.

This is good news for corn, oilseed and cotton output in India, as well as for palm supply from top growers Indonesia and Malaysia. Rains in the grain belt of Australia will help wheat, of which the country is the world’s No.4 exporter.

Only rice output could be hit given a severe drought in top exporter Thailand, although prices of the grain, together with that of the other crops, show no weather-related premium yet.

Cotton is at a two-month low, wheat has shed 12% this year, rice is at its lowest since 2008 and palm oil hit a three-week trough this week.

In fact, Malaysian palm oil stocks are at a six-month high.

“Palm oil output is rising, we haven’t seen any slowdown,” a Kuala Lumpur-based trader said. “You can see big boys in the trade are selling as we have forecasts of higher supplies.”

China, which was worried dry weather would hurt its corn crop, has also received widespread rains. As a result, its 2015/16 corn output is expected to surge to 231 million tons, 17 million tons more than a year ago, according to Thomson Reuters Research and Forecasts division.

Weather forecasters, however, shrugged off crop-friendly rains and reiterated that an El Nino weather pattern, that can lead to scorching weather across Asia and east Africa but heavy rains and floods in South America, was strengthening.

“Recent rainfall increases in Australia, the Philippines, India and mainland areas of Southeast Asia have given some false indication that El Nino is weakening,” said Drew Lerner, president of World Weather Inc.

“In reality, the event is still quite significant and is still expected to be a significant feature well into the Northern Hemisphere autumn season.”

Dry weather pockets

There are already some pockets of dryness in Asia.

North Korea has been hit by what it describes as its worst drought in a century, while in Pakistan, a heat wave has killed more than 1,000 people in Karachi.

In Thailand, the monsoon season has begun but 22 out of 76 provinces are still contending with drought conditions, affecting around 7.45 million hectares of rice farm land.

“Several rice growing areas have been drought-hit and the government is asking farmers to delay planting as it’s unable to provide water for irrigation,” said a Bangkok-based rice trader.

The weather bureau in Manila said 23 provinces continue to experience extreme heat or drought while 31 others are hit by a dry spell. The Philippines is a major rice importer. There will be lower rains this year in Southeast Asia and India, said Tamaki Yasuda, a senior coordinator for El Nino information at the Japan Meteorological Agency. “What we are seeing is a typical El Nino weather pattern that is growing.”