The South American soybean and corn harvests are strongly linked to the El Niño and La Niña weather patterns. Both Brazilian and Argentinian production hav
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!
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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:
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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.
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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.
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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
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