An extreme La Nina weather event is building momentum this year,provoking fears of damage to crops of coffee,grains and rubber leading to higher prices,though these could be capped if consumption falls in line with a bleak global growth outlook. * This year's 2011 La Nina seen weaker than last year's * La Nina already felt in US,to hit India,rest of Asia later * Supply shock seen bullish for prices La Nina,blamed for both drought and above-average rainfall,has formed in American waters,but forecasters who are still not certain it will hit Asia and Australia later this year say it will be weaker than last year's event. Combined with the global uncertainty weighing on commodities,that weakness may limit La Nina's impact on prices. In the immediate period the market is going to be focusing most significantly on the financial issues,not necessarily the supply issues. But we don't know how long that will last,said Luke Mathews,commodities strategist at Commonwealth Bank of Australia in Sydney. In time,fundamentals will assert themselves and production issues - if they were to occur - would assert themselves. Last year's strong La Nina event led to downgrades in Australia's winter grain output,fanning concerns over the supply of high-quality milling wheat; hurt Brazil's sugar cane production; boosted rubber prices about a third; lifted palm oil prices more than half,and disrupted coal and iron ore mining. This year's La Nina has delayed corn planting in Argentina,the world's second largest exporter of the grain; has brought unseasonal weather to top arabica producer Colombia,which could hurt coffee bean production and disrupt transport,and held up plans in the United States for red winter wheat planting. Recent weather forecasts show La Nina as a growing risk to Australia,which is still reeling from the 2010 event's damage to sugar cane after record floods that also hit coal miners and crippled exports. At the moment,I am not overly concerned about the La Nina weather,but I think it's a risk that needs to be on our radar screens and one we should be monitoring,said Abah Ofon,commodities analyst at Standard Chartered Bank in Singapore. The most critical thing really is if there's going to be any supply shock next year. If we do see a supply shock next year,then obviously that's going to be very bullish for prices,Ofon added. Crops at risk in Asia include sugar cane in India and Australia,rice in Thailand,coffee in Indonesia and Vietnam,and coal mining across the region. Supply tightness will make grains provision tougher for big consumers such as China and hamper rubber for tyre-makers in Europe and the United States. La Nina,a cooling of sea surface temperatures in the Pacific Ocean,triggers drought in places such as Texas and harsher winters elsewhere in North America,but brings higher than normal rainfall to Southeast Asia and eastern Australia. This year,we're looking at a different picture. We're looking at relatively weak conditions,either neutral or weak La Nina and a positive Indian Ocean dipole,said Andrew Watkins,an Australian government weather official. In the scenario he described,currents cooler than normal in the tropical eastern Indian Ocean are accompanied by water warmer than normal in the tropical western Indian Ocean. Those together would not suggest exceptional rainfall over eastern Australia,particularly in the southeast. But for the north of the tropics,it may well be increased rainfall,said Watkins. La Nina is associated with dryness and below average rainfall in Argentina,Uruguay and southern Brazil,where the weather phenomenon could delay planting of Brazil's grain crops again. Global supplies are already tight,particularly for corn,but also for the soybean complex,and the market really can't afford any significant production losses,said Mathews of Commonwealth Bank of Australia. The corn market remains the commodity with the tightest supply,therefore we think it is the one that is likely to test record highs,said Mathews,referring to U.S. futures,which hit all time highs at almost $8 a bushel in June. Rising grains prices are a perennial worry in many countries such as China,where corn hit an all-time high,driving pork prices to a record and stoking food inflation concerns in the world's most populous country. Still,global economic conditions appear harsh enough that if the worst fears of policymakers come true,falling demand could cushion some of the impact from supply constrictions caused by La Nina. I think there's going be a lot of uncertainty going into the next season,said Ofon of Standard Chartered. Global demand seems to be holding up,but if the current sluggish economic conditions continue,then that could impact demand. The International Monetary Fund has warned that Europe and the United States could slip back into recession next year unless they quickly tackle economic problems that could infect the rest of the world,while the U.S. Federal Reserve's warning of risks to the economy spooked investors. INDIAN MONSOON,PALM HARVEST India is also bracing for La Nina,which normally brings ample winter rain. The country is set to produce a surplus of sugar next season and recently freed exports of rice and wheat after a gap of four years,as it tries to cut down bulging stocks. The re-emergence of a weak La Nina condition cannot be ruled out over India,and if it occurs then southern India would receive more rain in October and December,said Medha Khole,a government weather official in the western city of Pune. Such a La Nina could boost the output of oilseed crops. If it occurs in October,it would bring in more rains to aid the planting of main winter crops like wheat and rapeseed,said S. Raghuraman,a senior analyst with consulting firm Agriwatch based in the Indian capital. In Southeast Asia,the rice crop in Thailand,the world's biggest exporter,has escaped floods and mudslides. But a La Nina developing by year's end would overlap with the rainy season in top palm oil producers Indonesia and Malaysia. The La Nina is most likely to be weaker than the 2010/11 La Nina episode,said Tan Ting Min,an analyst with Credit Suisse. If the La Nina is weak,it might have minimal impact on crops. However,this is the third consecutive weather disruption over a two-year period,said Tan,who felt such an event could keep palm oil futures above 3,000 ringgit per tonne. FACTBOX-Commodities thrive and suffer as La Nina returns A weaker version of La Nina may reappear this year,but dry weather has delayed corn planting in South America,while rains in Colombia could hurt coffee production and disrupt transport in the world's top producer of high quality arabica. La Nina,a cooling of sea-surface temperatures in the Pacific Ocean,triggers drought in places such as Texas and harsher winters elsewhere in North America,but causes above-normal rainfall in Southeast Asia and eastern Australia. Here are some of the important commodities affected by the weather anomaly. GRAINS,OILSEEDS * La Nina-driven weather could return to delay planting of Brazil's grain crop again,forcing Chinese buyers to rely on U.S. Gulf port soybeans longer and putting Brazil's corn output at risk. * Oil World warned early 2012 soybean crop outlooks in Argentina and Brazil are uncertain due to the possible disruptive La Nina weather pattern and because farmers may shift to corn on high prices. U.S. corn futures hit all time highs at almost $8 a bushel in June. * Dry weather that is delaying corn plantings in the world's No. 2 exporter,Argentina,could force some farmers to turn over more land to later-planted soybeans instead. * Minor rainfall in the drought-stricken U.S. Plains has fuelled anxiety about the fate of seeding the 2012 hard red winter wheat,a variety prized for its high-protein content and used in bread making. * Rising grains prices are a perennial concern in many countries such as China,where corn hit an all-time high,driving pork prices to a record high and raising concerns over food inflation in the world's most populous country. China is currently suffering from drought. * The rice crop has been spared from deadly floods and mudslides in Thailand,the world's biggest exporter of the staple. * Thailand is expected to have higher rice output of 25.1 million tonnes of paddy,slightly down from the previous forecast of 25.6 million tonnes,but still higher from the previous crop of 24 million tonnes,according to the Agriculture Ministry. * If La Nina develops at the end of this year,it could coincide with rainy season on top palm oil producers Indonesia and Malaysia. A weak La Nina is predicted to start in October 2011 when most parts of Indonesia will have already entered the rainy season,said Nurhayati,head of climate section at the meteorology office,adding that this year's rainy season was expected to be normal. We expect the rainy season in 2011/2012 to be conducive to agriculture commodity production. * But if La Nina triggers above-than-normal rainfall,fruit bunches could fail to develop due to poor pollination and harvesting could also be disrupted. Currently,there has been some intermittent heavy rain and hot weather in Sabah,which is speeding up the ripening process,said Joseph Tek,chief executive of IJM Plantations from Sabah state on the Malaysian side of Borneo. As for the La Nina impact,if it appears towards the end of the year,there may limited impact. * Malaysian palm oil futures struck record at 4,486 ringgit a tonne in early 2008. * Australia's wheat output is forecast at 26.196 million tonnes for 2011/12 - just shy of a record 26.3 million tonnes reaped in 2010/11,when a strong La Nina resulted in a wet harvest,boosting output but downgrading much of the crop to general purpose or feed wheat grades. * The Philippines also braces for a possible impact from La Nina. Heavy rains are common in the Philippines during La Nina events and the crops that are usually at risk when there are above-normal rainfall are unmilled rice and corn,said Maura Lizarondo,assistant director of Bureau of Agricultural Statistics. But so far,based on our latest survey of standing crops,it looks like we may hit or even slightly exceed our third quarter production forecasts for both. SOFT COMMODITIES * Some Colombian coffee growers and exporters doubt the main harvest in 2011 will be enough to meet the country's output target after torrential rains hurt plantations and led to fungus. The world's No. 1 producer of high-quality arabica beans,missed production targets in 2009 and 2010 due to bad weather and a tree renovation programme. * New York's arabica coffee futures rallied to its highest in more than 30 years at $3.089 a pound in May after heavy rains damaged the crop in Colombia,prompting roasters to jack up prices of retail coffee drinks. * Brazil's coffee belt may face more weather risks in the coming weeks if rainfall is erratic,as some forecasters fear,during the critical flowering phase that will define next year's crop. * Thailand,the world's second-biggest sugar exporter,expects to produce a record of 100 million tonnes of cane,or around 10 million tonnes of sugar as major sugar regions are far from areas hit by this year's deadly floods. [ID: nL3E7JI0KO * La Nina could lead to increased dry weather in Brazil,the world's largest sugar producer,where sugarcane output forecast has been revised down several times. * Sugar production in Brazil's center-south totaled 20.4 million tonnes from the start of the season to Sept. 1,down 9.4 percent from the same date a year earlier,according to cane industry association Unica. * Indonesia's natural rubber production is seen rising to 3 million tonnes next year,only up 3 percent from 2.9 million tonnes this year,due to a limited expansion of plantations,according to the Indonesian Rubber Association. * Top cocoa producer Ivory Coast produced a huge crop in the current 2010/11 crop year because of ideal weather conditions produced by La Nina. * Excessive rains are forecast to strike Vietnam's southern provinces between now and early November,which could extend the end of the rainy season to mid-November. * The late rain could disrupt Vietnam's coffee harvest that is expected to start from next month,while the crop's forecast bumper output will not be affected. The harvest will accelerate from late October,provided there will be no rain,a trader in Ho Chi Minh City said. * Last November unseasonal rains disrupted the harvest and lowered bean quality,but Vietnam still harvested a bumper crop. MINERALS * Australia has lifted its projections for iron ore output and exports,but cut its forecast for coal output on a slow recovery from natural disasters. * Australia's outlook for coking coal,another key steelmaking ingredient,is more subdued as the sector may need until early calendar 2012 to fully recover from recent floods. La Nina,the chief cause of the floods,may develop again later this year,albeit in a weaker form than last time. * In India,the world's third largest supplier of iron ore, La Nina may bring heavy rains in coastal region which can cause disruption in transport and cut supplies. * In China,La Nina could bring a sharp drop in temperatures as well as triggering drought. * Heavy rains and floods caused by La Nina could hit tin miners in Indonesia,the world's top exporter of the metal,and could flood coal mines too.
