Market Analysis
Over the last 4-6 weeks, the world’s grain and oil-seed markets focus has been on South America & in particular Argentina’s planting & growing season. Dryness during December caught the trade’s initial attention. However, a band of heavy rains set up from Buenos Aires westward to Cordoba’s eastern fields from late last month to the first couple weeks of January causing flooding & planting delays across the core of Argentina’s ag lands. Dryness has returned particularly in BA province where much of its beans are double cropped behind wheat.
Given soybeans vulnerability to excessive rainfall and flat terrain of central Argentina, this oilseed has been im-pacted more than corn so far this season. Argentina’s Ag Minister stated last week that 650,000 soybean ha. had been effected while 160,000 corn ha. had been impacted by weather. Their two major exchanges - Rosario (52.7 mmt) and Buenos Aires (53.5 mmt) each offered soy-bean estimates vs. the USDA’s 57 mmt projection for this season last week. These projections, which were above early talk of 51-52 mmt, and the weather turning dramati-cally dryer has pulled back bean prices, but heat and dry-ness may still be factor into Argentina’s BA province out-put if these conditions continue into mid February.
No government or exchange corn production estimates were made last week. Only the Ag Minister’s comments to a wire service about the possible impact on 160,000 ha. was pertinent corn information. However, this year’s substantial jump in Argentina’s plantings of 1 million ha. to 4.5 million has lessen the impact on this feed grain’s supply situation. This hefty jump in area occurred be-cause of Argentina’s eliminating quotas and export tariffs and S. American high prices because of Brazil’s second crop drought. Even making a 2 mmt decrease in the USDA’s crop outlook may slip their exports, but Argen-tina’s shipments will still likely be stronger than last year.
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What’s Ahead
Clear Argentine skies has lessen fears about further area losses & crop damage from excessive rainfall, which has weaken both bean and grain prices the past few weeks. Dryness in BA province remains an concern, but high temperatures will be needed to add stress to the crops. Given the likelihood of expanded
US soybean plantings, producers should have 15-20% of 2017 output priced in $10.20-$10.30 range.
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