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La Niña 2021 and the Coffee Market

#NOAA recently updated the forecast for #LaNiña to 70-80% chance for this season, depending on how this unfolds will determine the extent of the impact on the global #coffee #futuresmarket. The key point is that La Niña is often associated with cooler temps and dryness in #Brazil which could be a MAJOR problem for the #coffeemarket.

In the paragraphs that follow, I will outline how the El Niño/La Niña phenomenon impacts coffee, what the #forecast shows and what we need to watch for in the 2021/22 coffee year.

Commodity Meteorologist David Streit explains La Niña and what it means for the coffee market

What is El Niño/La Niña and what is the impact on coffee?

#ElNiño is a cyclical phenomenon characterized by warmer than average temperatures in the Pacific ocean along the equator ("3.4 region") that occurs every 2-7 years. This warming of the ocean temperature causes a shifting in global storm activity that has implications all over the globe from Asia to North and South America.

For coffee, we are primarily concerned with its impact on Brazil.

To understand why El Niño matters, you have to understand a bit about how global weather works: The sun heats up the oceans around the equator which creates air currents (hot air rises above the warm ocean) in the atmosphere.

These air currents caused by the interaction of the hot air above the equator and the cool air above the polar caps creates both global wind and precipitation. This weather activity is chaotic but has rough seasonality in different locations around the globe.

In other words, this makes our normal weather.

However, the normal weather patterns will occasionally push the hot water in the Pacific Ocean to one side which changes the storm activity. Peruvian fishermen started to notice this unusual storm activity happens sometimes near Christmas (usually starts around December), so they referred to it as El Niño (baby Jesus).

This pushed-to-one-side state is not stable, and when the ocean slushes to the other side it can cause the opposite effect (cooler than normal ocean temperatures). Scientists dubbed this colder tropical Pacific "La Niña" (to imply that its the opposite of El Niño) and this is what the weather services are forecasting for this season.

In fact, this is the second La Niña in a row. The previous La Niña last year caused dryness and cooler temperatures over the last crop season which in turn contributed to the #drought and multiple #frosts which we are still reeling from.

What does the forecast show?

The official definition of a El Niño is 0.5 degrees Celsius above normal temperatures, and La Niña is 0.5 degrees Celsius below normal temperatures. We forecast projections of ocean temperatures using models that predict what the temperature will be. A mean of multiple runs of this model gives us our "likely" forecast.

We are currently just above this 0.5 degree threshold and projected to drop to 1 degree below which would be a "moderate" La Niña.

What do we need to watch for?

A light to moderate La Niña correlation is not usually a concern for coffee producers. As you can see in the below graphic, a typical La Niña correlation is for drier than normal activity South of the coffee regions in Brazil and on the outskirts of the Norther regions. It is more of a problem for Brazilian corn and Argentinian farmers.

However, in a moderate to severe La Niña we can see this dryness push northwards (as we did last year), and this is where the problem for coffee occurs.

In the above Sep 2021 forecasts from NOAA, temperatures are projected to fall between 0.5 and 1.5 degree below average. This means that the there is a strong chance (70-80%) of La Niña occurring, with a significant chance (40-50%) of this being moderate or greater.

Over the next 3 months we will be watching the water temperatures and observing the models to see how this forecast solidifies. For the coffee market, a change of just half a degree C, can make all the difference.

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