The Return Of La Niña in The Southern Cone

• La Niña conditions have returned, bringing increased uncertainty in weather patterns across the Southern Cone (Argentina, Brazil, Chile, Paraguay and Uruguay).
• El Niño and La Niña are the warm and cool phases of a natural climate pattern across the tropical Pacific known as El Niño-Southern Oscillation, or “ENSO” for short. The two different phases represent variations in ocean surface temperatures in the central and eastern tropical Pacific Ocean, affecting wind and rainfall patterns.  La Niña typically brings wetter conditions to Central America and northern South America, while central and southern South America usually experience drier conditions.
• From 2020 to 2023, there were three consecutive La Niña events, referred to as the "triple dip." This was one of the longest-lasting occurrences in recent history, leading to severe droughts and wildfires across much of the Southern Cone.
• As the upcoming La Niña period unfolds, extreme weather patterns are set to continue. Even though this La Niña is expected to be weak, major wildfires and record-breaking heat have already been recorded in the region.
• Drought conditions present significant risks to key summer crops, particularly soybeans and corn, which dominate agricultural output in the region. For all countries in the region, lower global soybean prices, coupled with weaker demand from key trading partners like China, will weigh further on export revenues against a challenging global macro backdrop.
• That said, ongoing geopolitical uncertainties continue to pose risks to trade, potentially diverting exports and also increasing volatility in commodity prices. Additionally, if the La Niña cycle extends beyond March, drier conditions could persist for a longer period, further stressing crops and increasing production losses.

(Source: Fitch Connect)