With the peak of the La Niña weather pattern occuring in 4Q22 and then reducing in 2H23, this is a bad call for soybean in 2023. We will also need to keep a close eye on a stronger (but not dominant) El Niño in 3Q23. Our HOLD on TVO stands for a decent dividend yield.
Peak of La Niña in 4Q22 before weakening in 2H23
Based on the El Niño-Southern Oscillation (ENSO) Diagnostic Discussion report of Nov 10, the Climate Prediction Center upgraded its La Niña probability forecast by 6 percentage points (ppt) during Nov 2022-Jan 2023 from 86% (in its Oct report) to 92% (in its Nov report) but downgraded the La Niña probability forecast by 2-3% during Feb-Aug 2023 from 12-43% to 9-40%. In other words, La Niña probability will tumble from 100% in 4Q22 to 59% in 1Q23 and 13% in 2Q23 and 9% in 3Q23. In contrast, the ENSO-neutral condition increased from 0% in 4Q22 to 40% in 1Q23 and 72% in 2Q23 before subsiding to 54% in 3Q23, while the El Niño probability jumped from 0% in 4Q22 to 15% in 2Q23 and 37% in 3Q23. The overall weather will be still dominated by La Niña in 1Q23 before switching to ENSO-neutral condition in 2Q23-3Q23.