Extreme weather in China is threatening to disrupt more commodities, even niche ones like rubber and peanut crops, which may push the world’s biggest consumer to import more.
(Bloomberg) — Extreme weather in China is threatening to disrupt more commodities, even niche ones like rubber and peanut crops, which may push the world’s biggest consumer to import more.
Rubber-tree tapping in Yunnan province, the country’s top grower, has been delayed by severe drought and powdery mildew disease, which can halve production in the worst cases.
“Tapping can’t be carried out in Yunnan and output is expected to fall,” said Tang Xiaonan, an analyst at JLC, a China-based commodity consulting firm.
Less than 20% of rubber plantations in the area were able to start tapping on time, but they had to stop because of drought that has persisted for more than a month, according to the Yunnan Natural Rubber Industry Group, a state-owned producer and processor.
Without any improvement in the situation, natural rubber production will drop significantly, the company said in a notice to the Shanghai Futures Exchange, a copy of which was seen by Bloomberg. That could increase imports by China, which is already the world’s top buyer. Yunnan Natural Rubber didn’t immediately respond to requests for comment.
Erratic weather is increasingly upending agriculture production across the globe. A La Nina event slashed grain and soybean output in Argentina in the past year. Now forecasters are warning that an El Nino is looming, bringing drought to Asian crop areas and rains in South America. Elsewhere, stifling heat has parched India, Thailand and Bangladesh.
China Apples
Back in China, a cold front recently swept across the north of the country, spurring concerns about damage to fruit and vegetables. Apple futures surged on the Zhengzhou Commodity Exchange as investors piled in with bullish bets.
Peanut farmers, who have just planted their first crop in top growing regions like Henan and Shandong, are getting worried too. Even though the severe cold in recent weeks had little impact on the emerging plants, the prospect of a dry summer caused by El Nino could be devastating for the crop.
“El Nino could have a significant impact on peanut production,” said Jiang Ying, an analyst with Huatai Futures. “If it happens, there will probably be drought around July and August in northern China, a crucial period for peanuts.”
Drought hit peanut yields last year, leaving some farmers with empty shells and contributing to a decline of as much as 30% in production.
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