January 5, 2012
While Brazil has pinned hopes on favourable production, the South American corn and soy futures have remained largely in weather-market mode to start the new year.
The markets have been focused on hot, dry conditions in Argentina and southern Brazil, which have stressed crops there over the past couple of weeks. The moisture situation is now critical for Argentina's corn crop and is becoming critical for the soy crop as well.
December rainfall was less than 50% of normal across most of Argentina's main crop belt, with the notable exception of the southern half of Buenos Aires state.
The central and northern parts of Argentina's main crop belt from northern Buenos Aires province through Cordoba and Santa Fe provinces were dry over New Year's weekend and experienced high temperatures in the 90°s and 100°s F. More of the same weather is on tap for that region through the end of this week, which will bring significant crop stress.
However, weather models now indicate a cool front will move in next week, bringing an increase in rainfall and temporary relief for Argentine crops. Although the moisture is not expected to be enough to end crop worries, it will certainly buy crops some time and one good soaking rain could bring the weather market to an abrupt end.
The influence on Argentina's weather from the La Niña weather event should peak this month, with the rainfall pattern likely to improve in February.
The situation is certainly more critical for the corn market with early planted corn already pollinating in Argentina, where conditions are worst. With US and world corn stocks remaining historically tight, the market has been counting on a record Argentine crop to meet spring/summer 2012 demand.
It is still early in the Argentine soy growing season and improved rains during the second half of January could boost the crop going into the key growing period.
Crops have been stressed in southern Brazil as well, but not as badly as temperatures have not been as extreme there as in Argentina. Also, parts of Parana, which is Brazil's top corn-producing state and No. two soy producer, saw some meaningful moisture over the holiday weekend along with the northern half of Brazil's southernmost growing state of Rio Grande do Sul.
Crop prospects remain favourable across most of Brazil's large centre-west growing belt, even though rainfall has been running below normal as rains have been timely and temperatures favourable.
Many in the Brazilian soy trade are still expecting a record crop in 2011-12. Celeres consultancy has kept its crop estimate at 75.6 million tonnes, unchanged from December slightly above the Brazilian agriculture ministry's official 2010-11 crop number of 75.3 million tonnes.
ABIOVE, the Brazilian vegetable oil industry association, whose members include large international grain firms, on Tuesday, pegged Brazilian soy production at 74.6 million tonnes, above its estimate of 74.3 million tonnes for 2010-11 production.
