The South American soybean and corn harvests are strongly linked to the El Niño and La Niña weather patterns. Both Brazilian and Argentinian production have already suffered from the climate changes caused by these natural phenomena. Over the last four seasons, these events have brought different challenges and impacts for producers in the region. 

To understand the influence of La Niña on current harvests, expert Luiz Fernando Roque, Market Intelligence Coordinator at Hedgepoint, explains what the expectations are for South American water stress in 2025. Read on and enjoy! 

Read also: 

• 2024/2025 corn and soybean harvest: Brazil and Argentina in search of records 

Historical impact of climate on South American harvests 

The Hedgepoint professional begins by pointing out that the impacts of El Niño and La Niña in South America are always monitored due to the historical influence these events have on the region. In Brazil, the 2021/22 soybean crop faced losses in the South due to La Niña, while the following harvest (2022/23) registered a record national production – even under the influence of the same phenomenon. “Meanwhile, Argentina recorded its biggest drop in production in many years, losing almost half of its production due to a lack of rain in 2022/23,” says Luiz

On the other hand, the El Niño that occurred in 2023/24 brought a reverse pattern. The phenomenon caused above-average rainfall in Argentina and southern Brazil, but reduced humidity in north-central Brazil. This behavior caused significant production losses, especially in Mato Grosso – which prevented a new record production in the country.

This alternation between weather patterns shows that the impacts of each phenomenon can be localized, but they don’t always affect the entire region homogeneously,” the expert points out. Below are the patterns that can be expected from each event:

La Niña

• Lower humidity in spring/summer over Argentina, Uruguay and southern Brazil (mainly in producing states such as Rio Grande do Sul and Paraná); 
• It could also affect parts of southeastern and central-western Brazil and part of Paraguay; 
• Higher humidity in states in the Center-North of Brazil; 
• In Argentina, the Core Zone, where the main producing provinces are concentrated, tends to suffer from prolonged droughts. 

El Niño

• Higher humidity in Argentina, Uruguay, southern Brazil and Paraguay; 
• Heavy rains in Argentina and southern Brazil could benefit some regions, but could also hamper harvesting and logistics; 
• Lower humidity in the Center-North of Brazil, especially for the states of the North and Northeast regions. 

Read also: 

• United States: influence on the commodities market 

La Niña’s impact on South American crops in 2025 

For this year, NOAA’s (National Oceanic and Atmospheric Administration) climate forecast is that La Niña will not last long. The institution’s meteorologists estimate a 66% chance of a change to a neutral phenomenon between March and May this year. See the probabilities published by the institution: 

Fonte: NOAA

“According to the monitoring, the current La Niña should be milder in the South American region. Even so, important losses could occur in Argentina and southern Brazil. However, they shouldn’t be as significant as those recorded in previous seasons,” says Roque.  

The expert also says that low humidity is not the only consequence of La Niña in the region. Another critical factor for the 2025 harvest is high temperatures and excessive rainfall, which could compromise crop development. “At the moment, excessive rainfall doesn’t pose much of a threat to the harvest and the flow of production,” he adds.

Read also: 

• Oil market highlights: 2024 and early 2025 data 

The influence of climatic phenomena on the agricultural market 

The occurrence of production shortfalls in South America is one of the main factors influencing the fluctuation of soybean and corn prices on the global agricultural market. In previous years, the severe drought caused by La Niña resulted in the appreciation of futures contracts traded on the Chicago Mercantile Exchange (CBOT).  

“This impact is especially true for soybeans, given that we’re talking about the largest producing region in the world. Brazil and Argentina account for more than 50% of global production each year,” adds Luiz. 

The period most sensitive to price changes for soybeans is the so-called “South American climate market”, which takes place between September and March. This is a delicate time as it covers the planting, development and harvesting of most of South America’s production.  

For 2025, market expectations are optimistic. Despite some expected losses for Argentinian and Rio Grande do Sul soybeans, the trend is for South American production to be higher than the previous year. The expert points out that Brazil will play an important role in this scenario due to a probable record in the country.  

“As such, we don’t expect any major impacts in Chicago for soybeans, although the climate market is a period of speculative moments. In the case of corn, it’s still too early to predict the influence of the weather on prices. We’ll have to wait for Brazil’s second crop to be produced, most of which should develop between the end of La Niña and the start of a neutral weather pattern,” concludes the expert.  

Read also: 

• The importance of hedge diversification in the commodities market 

Risk management with hedging tools

The weather events discussed in this article reinforce the importance of price risk management for players in the agricultural market. In years of production losses, buyers tend to reduce their supply risk via forward or frame contracts and their financial risk via stock exchange and foreign exchange transactions. Sellers, however, seek to reduce their exposure in the physical market and take advantage of moments of price appreciation. Both use the most varied hedging tools offered by the market.  

As Hegdepoint’s Intelligence Coordinator pointed out, risk management provides tools that are applicable to the entire agribusiness chain. These hedge products are used not only to deal with climate risks, but also to address financial risks related to volatility in production, supply and more.

Get in touch with the Hedgepoint team and find out more

——————————————————————————————————————

This document has been prepared by Hedgepoint Global Markets LLC and its affiliates (“HPGM”) solely for informational and instructional purposes and is not intended to establish obligations or commitments to third parties, nor is it intended to promote an offer, or the solicitation of an offer, to buy or sell any securities, futures, options, currencies and swaps or investment products. Hedgepoint Commodities LLC (“HPC”), a wholly owned entity of HPGM, is an Introducing Broker and a registered member of the National Futures Association. Trading futures, options, currencies and swaps involves significant risk of loss and may not be suitable for all investors. Past performance is not necessarily indicative of future results. Hedgepoint clients should rely on their own independent judgment and that of external advisors before entering into any transaction that is introduced by the company. HPGM and its associates expressly disclaim any liability for any use of the information contained herein that results directly or indirectly in damages of any kind. In the event of questions not resolved by our customer service team ([email protected]), please contact our internal ombudsman channel ([email protected] ) or 0800-878 8408/[email protected] (for customers in Brazil only).