Can South American crops make up for North American losses?

In a season when the world needed big crops, Northern Hemisphere weather did not cooperate. Conditions have ranged from mediocre in China/India to poor in the United States to disastrous in Europe. None of the major agricultural producers in the Northern Hemisphere had a “good” year when bumper crops would have been a major benefit to the world.

For relief, we look to the upcoming growing season in the Southern Hemisphere, where South America is the largest crop production area. Crops are planted in the spring (October/November) and harvested in the fall (April/May). A favorable growing season yielding big crops would be very beneficial for the world and help to ease the crisis next year.

Unfortunately, some variables point away from the Southern Hemisphere season being a “bin buster.” First is the current dryness in South America. A significant portion of the prime growing areas (corn, soybeans, and wheat) in Brazil, Paraguay, and Argentina are currently in severe to exceptional drought conditions.

Figure 1: Early August drought levels showing a significant portion of prime growing areas in severe to exceptional drought conditions (source: Everstream Analytics).

South American drought is at historically high levels after years of general ongoing drought. Currently, the drought level is not as severe as it was a year or even two years ago, but it is still at historically high levels. The acute dryness since 2000 does not bode well for the future of one of the globe’s largest food producers.

Figure 2: Drought index in South America based on arable land through early August 2022. Positive values represent a higher percentage of crop areas with adequate moisture, negative values represent the opposite – a higher percentage of acreage in drought conditions (source: Everstream Analytics).  

The second impact on the upcoming growing season is the ongoing La Niña event across the Pacific Ocean. La Niña, defined as sea surface temperatures that are cooler than normal in the equatorial Pacific, has been in place during the past two years, and the latest computer models indicate it will remain in place through early 2023.

Why is this important? Because during La Niña events, the jet stream pattern “downstream” of the Pacific is altered. That pattern creates a higher probability of heat and dryness (crop stressors and yield reducers) in the major producing areas in South America – Argentina, southern Brazil, and Paraguay.

The La Niña variable increases the probability of heat and dryness stress during the upcoming season, making it difficult for South America to have a highly favorable growing season and bumper crops.

Figure 3: Current sea temperature (SST) anomalies as of August 7, 2022, with La Niña clear in the central and eastern Pacific.

The global food crisis can only be solved, or at least eased, if the world harvests bumper crops which increases the supply side of the equation. This did not happen in the Northern Hemisphere with myriad weather problems in the big producing areas – Europe, the U.S., and China.

And it looks dicey in the Southern Hemisphere, which will begin planting crops including corn and soybeans in late September and October. South America is the biggest crop producer and there are early warning signs that the upcoming season is going to feature higher probabilities of problems preventing favorable weather and big crops.

All in all, there is no sign on the supply side of the equation that big crops are coming to solve or ease the global food crisis during the remainder of this year or into 2023.

Everstream clients are receiving detailed information about this disruption.

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