La Niña reappears, how will it affect the fat and sugar?

The La Niña phenomenon usually has an impact on the prices of a variety of agricultural products. It will bring more precipitation to countries such as Australia, and bring expectations of reduced production for the global food market, thereby pushing up food prices. According to the US Climate Prediction Center, the La Niña phenomenon has already taken shape. Market participants said that this weather phenomenon will affect the production of many agricultural products such as soybeans, rapeseed, sugar, and coffee.

The last time La Niña came was in 2011, when the World Food Price Index released by the Food and Agriculture Organization of the United Nations rose by nearly 40%. La Nina's appearance again, will it set off a global weather market for agricultural products? Since the beginning of this week, the domestic commodity market oil and sugar futures prices have soared, indicating that funds are ready to move.

La Nina makes waves

La Niña stands for "little girl, saint" in Spanish, specifically referring to the phenomenon of abnormally cold water in some areas of the equatorial Pacific.

According to the definition of my country’s National Climate Center, when the equatorial central and eastern Pacific (Nino3.4 area, that is, the area between 120° to 170° west longitude and 5° north latitude), the sea temperature is 0.5 degrees Celsius lower than normal, and it enters La Nina State, if it lasts for 5 months, it is determined that a La Niña event has formed.

Recently, many international meteorological agencies have warned that there may indeed be a La Niña phenomenon in the autumn and winter of 2020. According to the analysis data of the Australian Bureau of Meteorology, in the week at the end of August, the surface water temperature in many parts of the tropical Central and Eastern Pacific has been significantly lower, and even in some areas it has been lower than 1 degree Celsius.

"In August, the global climate was in La Niña. According to the NOAA forecast of the US Atmospheric and Oceanic Administration, the probability of extending La Niña in winter is 75%. For soybeans, winter is the soybean growing season in countries such as Brazil and Argentina in the southern hemisphere. Once La Niña occurs, this It may cause droughts in Brazil and Argentina to reduce soybean production, and international soybean prices have risen sharply.” According to reporters, Yang Ruixia, a researcher of agricultural products at SDIC Anxin Futures, said.

Li Xiaowei, a sugar analyst at Yide Futures, believes: “It is reported that the La Niña weather this time mainly occurred in Southeast Asia and Australia. Australia is the world’s third largest sugar exporter. Although its position is more important, the output is not too high. Exports accounted for more than 50% of the world, and Thailand, the two countries accounted for more than 70% of the world’s exports, and the proportion of exports from other countries is not too high. Brazil’s new crushing season has increased production significantly, and it will export a large number of exports to supplement global supplies. For the sugar market, what needs more attention is the above-average drought. For example, Thailand’s 43% reduction in production last year was due to drought."

Fat and sugar

Historically, the La Niña phenomenon usually leads to an increase in international soybean prices.

"In 2011-2012, La Niña lasted long and serious. From spring to summer 2012, large crop losses occurred in both southern and northern hemisphere soybeans, and international soybean prices rose to historical highs." Yang Ruixia said.

In contrast, sugar is less affected. Li Xiaowei said that La Niña and El Niño, two more extreme weather, usually bring droughts and floods. If the duration is short, it will have little effect on sugarcane production. If drought accumulates to a certain extent, it may have a greater impact. It is currently in the growing period of sugarcane and sugar beet, and a lot of precipitation and a sufficiently high temperature difference are needed in the later stage to provide sufficient growth conditions. The weather's impact on sugarcane needs to be looked at in detail. Unlike other agricultural products such as soybeans and rapeseed, once floods or drought occur, the impact will be obvious, and it may even be a large-scale reduction in production.

Li Xiaowei said: "Maybe you see this piece of sugarcane field being soaked, but soon the water drops down, which has little effect on it. The current stage is its growth period. If there is enough water, the sugarcane It grows very high in a short period of time, thereby increasing the overall yield. If the temperature difference in the later period is large enough, that is, during drought, it will help increase the sugar content."

At the current point in time, Brazil is in the production stage and has not yet reached the peak of production. Southeast Asian countries such as Thailand and India are in the sugarcane growing period and have not yet officially started squeezing.

"In late September, sugar beets at home and abroad will begin to squeeze. The overall situation in the sugar market this year is that the supply has increased and the demand has decreased. The new squeezing season is about to start. It is expected that in addition to the large increase in sugar extraction in Brazil, other countries will Stable." Li Xiaowei analyzed that Australia's sugarcane is grown in coastal areas, so whenever there is a relatively large global weather such as La Nina or El Nino, it is the first to be affected.

"Every time the weather hype starts in Australia." Li Xiaowei said that at present, the overall extreme weather phenomenon in the sugar-producing countries in Southeast Asia is not particularly obvious.

Weather City brings space for hype

Will the domestic agricultural product market repeat the bull market in 2011? How much space is there for speculation in the weather?

Since the beginning of this week, in the atmosphere of speculation in the weather market, futures varieties such as oil and oilseeds and white sugar have ushered in the rise, especially the rise of oil and oilseeds futures. According to data from Wenhua Finance and Economics, as of September 15, the main contracts of soybean, vegetable oil, palm oil, and sugar futures have risen 8.1%, 6.3%, 10.6%, and 7.4% since August.

"The international soybean market is in a state of strong growth. On the one hand, it is based on the market's expectation that China's strong purchasing demand will continue. On the other hand, the La Niña theme also brings certain imagination and long-term uncertainty to the market." Yang Ruixia said that investors can actively pay attention to the actual procurement situation in China and whether there will still be the support of La Niña during the growing season in the southern hemisphere. In terms of investment, they can make long-term orders for soybean meal on dips.

Li Xiaowei believes that even the severe drought in Thailand last year and the reincarnation of La Niña and El Niño in previous years have not been too exaggerated. Although a typhoon can cause sugarcane to fall, sugarcane can still grow when it falls, and a lot of precipitation is conducive to sugarcane growth. For agricultural products, other varieties may be more affected, and prices fluctuate more drastically. From the perspective of hype space, the current external sugar prices are at a moderately low level and there is strong support. In the short term, in the context of Brazil's increase in production and the start of a new crushing season, the funding sentiment is not too optimistic. If funds chase weather themes, sugar prices may gradually rebound from low levels, and the peak consumption at the end of the year will boost market sentiment. If the two resonate, it will be a good investment opportunity for sugar futures and options.