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Thailand (Bualuang): Agro & Food - La Niña upgrade in 2Q21 through 1Q22

  • La Niña upgrade again in May report; ENSO-neutral in Jun-Aug
  • Dryness in the Upper Midwest; serious drought in Northern Plains
  • Possible derecho prediction in the Midwest this summer

With the La Niña probability upgrade in the May report by the Climate Prediction Center (CPC) to 53-55% in 4Q21 through Feb 2022 and the dominant La Niña condition during this period, we believe that it is starting to look positive for soybean (SB) price again in 4Q21 on drought expectations in South America (especially in Argentina). Meanwhile, the current dryness and serious drought condition in the US Corn Belt is likely to push the global SB price higher. Our TRADING BUY on TVO stands, led by the robust 2Q21-4Q21 earnings and its high dividend yield.    

La Niña upgrade again in May report; ENSO-neutral in Jun-Aug

Based on the El Niño-Southern Oscillation (ENSO) Diagnostic Discussion report of May 13, the CPC upgraded La Niña probability forecast again by 29 percentage points (ppt) during 2Q21 from 21% (in its Apr report) to 50% (in its May report), by 6ppt during 3Q21 from 30% to 36% and by 7ppt during 4Q21 from 46% to 53%, following its abruptly significant La Niña downgrade in its Apr report (by 17% during 2Q21, by 9% during 3Q21 and by 5% during 4Q21). Athough the ENSO-neutral condition is likely to dominate with its probability of 57-73% during Jun-Aug 2021, its intensity will subside with its probability dropping to 38-40% during Oct 2021-Feb 2022. La Niña condition will revive again in 4Q21 with its probability ramping up from 36% during 3Q21 to 53-55% during Oct 2021-Feb 2022. This is likely to repeat the same weather pattern as in 2020 that La Niña condition had developed since 3Q20 through 1Q21. In light of this, we might see dry conditions start developing in South America (especially in Argentina) in 4Q21 which will be positive for the global SB price in 4Q21 through 1H22.   


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