No matter what time of year it is, weather is always a key factor for crop markets. In general, crop prices declined late in 2011, but they rebounded in early 2012. The key factor in the recent price moves has been weather developments in key corn and soybean production regions of Argentina and Brazil. Droughts in those key producing countries have led to declines in production forecasts, and these lower production forecasts have boosted prospects for U.S. corn and soybean exports.
The drought has been severe in Argentina. Some key growing areas received almost no rain in December suffering through the worst drought in at least 50 years. It was still drier than normal in January but most areas received between 50 percent and 75 percent of normal precipitation. Weather conditions have improved recently with good rains in northern Buenos Aires and southern Santa Fe. It is too early to know for sure how much the rains will help but drought conditions have eased at least for now. February is midseason for both corn and first crop soybeans in the region so rainfall now can have a significant impact on production, especially for soybeans.
click image to zoom Early in the season, Argentina’s corn production was expected to be near 27.5 million tonnes. As the drought has persisted the size of the crop has been revised down. USDA’ estimate in January was 26 million tonnes and in February the figure was 22 million tonnes. Crop production estimates from private forecasters in Argentina are as low as 20 million tonnes or less. With a smaller crop in Argentina, USDA raised the 2011/12 forecast for U.S. corn exports to 1.70 billion bushels, up from 1.65 billion in January.
Soybean and corn production prospects in Brazil have also been affected by the dry weather so far this growing season. Soybean production in Rio Grande do Sul is put at around 8 million tonnes for this year, down from more than 11 million tonnes last season. Yield potential has also been reduced in other parts of the country. USDA forecasts Brazil’s soybean production of 72 million tonnes, but some other forecasters put production down at 70 million tonnes. Brazil’s corn crop is put at 61 million tonnes, unchanged from the January forecast.
The drought in South America is attributed to the influence of the La Niña weather pattern in the Pacific. Temperatures have been well below normal since last summer and forecast models show the condition remaining in place, albeit weakening, until spring. Models indicate that ocean temperatures could move above normal by late spring. The La Niña weather pattern affected the drought in the southern U.S. last year and weather forecast maps show the dry weather across the south continuing at least through May.