Supply

La Nina Increasing Transportation Challenges

Recent heavy rains in the United States have resulted in a surge in water levels that is following a similar trend to last year as shown in the chart below. The Upper Mississippi River will likely remain closed through the third week of April. Lock and Dam 15 is forecast to crest on April 11 at 17.5 feet. The river will not reopen until the water level is below 15 feet. One unexpected heavy rain could extend the opening date to May. For farmers in the Upper Mississippi region, the loss of their primary export channel is painful. The good news is the National Oceanic and Atmospheric Administration’s (NOAA) 14-day outlook has the Upper Mississippi River region cooler and drier than normal. It’s important the river opening does not drag into summer because, in La Nina years, hurricanes are more prevalent.

Source: Army Corps and NOAA

It’s important for the river to open soon because in La Nina years, the number of hurricanes increases. According to Wunderground, “the presence of La Nina is not required for the Atlantic to have a busy hurricane season, but it certainly helps. The La Nina flavored years of 2010 and 2011 are among several tied for the third-most-active Atlantic seasons on record (both years saw 19 named storms). The next La Nina year, 2016, was also quite active, with 15 named storms that included Category 5 Matthew and three other major hurricanes. La Nina conditions recurred midway through the hyperactive and catastrophic 2017 season that produced Harvey, Irma, and Maria.” When a La Nina will form is very difficult to predict, but every named hurricane could shut down the Center Gulf for a few weeks. The 2020 weather season is shaping up to be another challenging year for the barge industry.

Source: Army Corps and NOAA

“La Nina is also characterized by higher-than-normal pressure over the central and eastern Pacific,” reports National Geographic. “This results in decreased cloud production and rainfall in that region. Drier-than-normal conditions are observed along the west coast of tropical South America, the Gulf Coast of the United States, and the pampas region of southern South America.” For U.S. farmers, the prospect of drought in Parana and Rio Grande do Sul, the two southernmost states in Brazil and the second and third production states that account for one-third of Brazilian soybean production would help soybean prices improve dramatically. La Nina events are also associated with above-average rainfall in northern Brazil. Obviously, the timing of when La Nina begins will impact the timing of the rains, which could have a major impact on production and transportation.  For farmers located in the Delta and Southeast, the prospect of dry weather coupled with hurricane flooding is not very pleasant. Likewise, the hurricanes that hit Texas can provide timely rains for West Texas, the Southern Plains, and eventually the Midwest.

According to National Geographic, other La Nina impacts around the world are increased summer monsoon rainfall in Southeast Asia, especially in northwest India and Bangladesh.  However, La Nina events are associated with catastrophic floods in northern Australia.

La Nina is a climate pattern that describes the cooling of surface ocean waters along the tropical west coast of South America. La Nina is considered to be the counterpart to El Nino, which is characterized by unusually warm ocean temperatures in the equatorial region of the Pacific Ocean. La Nina events may last between one and three years, unlike El Nino, which usually lasts no more than a year. Both phenomena tend to peak during the Northern Hemisphere winter.

Alan Barrett

Director of Research and Consulting

Higby Barrett LLC

Alan Barrett is the Director of Research and Consulting for HIgby Barrett LLC. He is an accomplished commodity economist with more than 25 years of experience in futures and cash markets with a focus on cotton, commodity projects, non-traditional agricultural products, transportation and supply chain studies. Alan spent six years as a commodity futures broker. His expertise encompasses feasibility studies of oilseed crushing plants (soybean canola, and cottonseed), grain elevators, export elevators, shuttle elevators, grain container operations, flourmills and other processing facilities. Alan also has conducted transportation supply chain studies for grains, oilseeds, fertilizer, coal, natural gas, crude oil, and petroleum products. Alan has considerable experience in non-traditional agricultural products such as coal, coke, natural gas, chemicals, hydraulic fracturing fluid, hydraulic fracturing proppants, glycerin, fertilizer, micronutrients, salt, limestone, cement, iron ore, pig iron, and steel, especially feed ingredients. Mr. Barrett has a BS and MS in Agricultural Economics from the University of Tennessee.