Weather services warn of potential La Nina return

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A new round of the extreme weather patterns that devastated production of iron ore, coal and agricultural crops such as wheat in Australia, South America and the U.S. in late 2010 could be poised to return this autumn and hit prices in the process, but with less serious consequences overall than last year, weather forecasters told Dow Jones Newswires Monday.

Sentiment towards commodities lying in the traditional path of conditions known as La Nina is starting to turn more bullish, exacerbated by supply shortages in a number of products like iron ore and coal.

Forecasting models by the U.S. National Weather Service’s Climate Prediction Center predict La Nina will redevelop this autumn.

“Atmospheric patterns continue to reflect La Nina-like conditions,” the weather body said.

La Nina is a periodic climatic phenomenon that brings more rain to the western Pacific, and to a lesser extent, to the eastern Pacific. Climatologists blamed La Nina for last year’s floods that gripped Australia, resulting in major losses to coal and iron ore stockpiles.

Australia, the world’s largest exporter of coking coal, lost around 10 million metric tons of its supply last year as mines were flooded, causing prices of the commodity used in steelmaking to soar.

But while it isn’t clear what impact La Nina might have on the production and shipment of commodities, its return isn’t expected to cause the same serious problems as in 2010.

That’s because historically the La Nina weather phenomenon occurs in bursts of three consecutive years, with the first one being the worst and the next two much milder.

Yet that doesn’t mean the changing weather patterns won’t hit the production of crops and products like coal this time around.

Joe Vaclavik, grains broker at Chicago-based MF global, said from an agricultural commodity markets perspective, the biggest fear of a second La Nina would be the continuation of the current drought in the U.S. southern plains, causing further damage to the winter wheat crop.

Futures prices for winter wheat grown in the southern Plains are already up 13% from a year ago at about $7.65 a bushel at the Kansas City Board of Trade, as weather-related concerns mount over the next crop.

Matt Rogers, President of Maryland-based Commodity Weather Group, warned that possible effects from the second round of La Nina could bring above-normal precipitation in eastern Australia, but would actually benefit the wheat and barley crops in terms of moisture. Yet, dryness concerns could be an issue for Argentina and southern Brazil, which would experience lower amounts of rainfall, causing damage to wheat, corn and soybean yields.

-By Neena Rai, Dow Jones Newswires; 4420-7842-9450;

(END) Dow Jones Newswires

August 08, 2011 13:27 ET (17:27 GMT)

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