December 13, 2011
Argentine corn crop forecast overly positive
The presence of dry weather is beginning to make the USDA's most recent outlook for Argentine corn crop appear overly hopeful, causing both grain and soy to go against broader market weakness.
Growing conditions for corn in the world's second-largest exporting country "have become increasingly stressful in the past two-to-three weeks", a crop forecaster said.
The western corn area has suffered temperatures which topped 96 degrees Fahrenheit over the weekend, while falling nearly to 60 degrees at night.
"The 35-degree difference in daily temperatures indicates a very dry atmosphere with desert-like growing conditions," an analyst at Martell Crop Projections said.
In the eastern grain belt, corn in the top producing state of Buenos Aires is in jeopardy because of reduced sub-soil moisture.
"Not only was corn planting seriously delayed, but growth was also stunted by persistently cool dry conditions."
While heavy rains reached the state a month ago, drought seems to be resuming in December, the crop forecaster said, forecasting at best one-quarter of an inch of rainfall over the next week, when very heavy rain is needed.
The USDA's forecast on Friday (Dec 9) of an Argentine corn crop of 29 million tonnes, up 29% on year, is starting to look overly optimistic.
The dry forecast was supported by weather service WxRisk.com, which said that while large parts of Brazil, including the key growing states of Mato Grosso and Minas Gerais, were due for 4-10 inches of rain over the next week,
"A large slow moving upper low off the south east Brazil coast will ensure that south east Brazil, Paraguay, and all of Argentina see very little additional rainfall over the next seven days," WxRisk.com said.
The fears for South American dryness also gained traction among market chatter, with Benson Quinn Commodities saying that "the trade remains a little concerned about the weather pattern in Argentina drying out".
At rival broker Country Futures, an analyst said "Weather models in South America remain dry over the next few weeks and that is supporting the soy on any price breaks."
Argentina is also the third-ranked exporter of soy.
CBOT corn for March stood 0.3% higher at US$5.96 a bushel in late deals, and January soy up 0.5% at US$11.12 a bushel, on what was a weak day for many risk assets.
Indeed, many dollar-denominated commodities struggled against a greenback which soared 1.1%, making them less competitive as exports, while Wall Street stocks stood 1.8% lower in afternoon trade.