El Niño poses new threat to Brazil's cane and coffee, aid to soy

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The El Niño weather phenomenon may cause new problems for Brazil's drought-damaged sugarcane, coffee and orange crops if it materializes later this year, but it would create the perfect climate for the next soy and corn harvests.

Climate models show Pacific ocean surface temperatures are rising with an increasing probability of turning into El Niño for the first time since 2009 in coming months.

In past years, the phenomenon has brought heavy rain to parts of Argentina and southern Brazil, where hot dry weather struck at the beginning of the year.

"It would be around June, the start of El Niño or at least higher than average temperatures around the equatorial Pacific," said Franco Villela, a meteorologist at Inmet, Brazil's national meteorological institute.

Though El Niño is not a certainty, companies and analysts are already attentive to its potential impact on agricultural superpower Brazil, the top exporter of sugar, coffee and soy.

"Initially it was a rare possibility but now some weather forecasters are already saying there is a 75 percent chance that El Niño may return," Stefan Uhlenbrock, senior commodities analyst for F.O. Licht, said at an event in Sao Paulo on Monday.

For Brazil's main center-south sugar area, wet weather in the late crushing season would reduce the sugar content in the cane, he said. The world's largest sugar and ethanol producer Raizen also said last week that El Niño rain was a significant risk to cane harvesting.

"For cane, coffee and citrus it's the worst possible scenario," said agrometeorologist Marco Antonio dos Santos of Brazil-based Somar Meteorologia, adding that quality as well as ability to harvest the crops would be affected.

Still, "non-stop" El Niño rains in June or July wouldn't be all bad for agriculture in Brazil and are actually ideal for soybeans and corn, he said.

Analysts at Thomson Reuters Lanworth in Chicago also said El Niño conditions of increased precipitation in Argentina and southern Brazil during South America's late spring and early summer "generally resulting in favorable yield outlooks for the next season".

Brazil is easing out of what was the hottest and driest summer on record in the densely populated southeast, spurring fears of water and energy rationing in a country where the majority of power comes from hydro reservoirs.

The drought likely cut 11 percent off the current coffee crop according to a Reuters poll of analysts and erased 25 million tonnes of cane according to F.O. Licht.

Climate conditions should be normal for South America's fall over the next three months, before any possible El Niño effects, said Villela. Frost in the south is possible within the next month and moderate rainfall expected.

"Even with the forecast for normal rain, it won't be enough to replace the losses we saw over the summer," he said.

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