Dry weather in South America is expected to push U.S. soybean futures higher as traders believe the U.S. may have to supply more of the world's demand, according to a Dow Jones Newswire report.
Market participants, particularly importers, are hoping South America produces large crops to help replenish global supplies, which have been drained by robust buying by China, the world's top soybean importer.
Fields in South America, some of which have received less than 30 percent of normal rain since Oct. 1, will continue to be dry for the next week, increasing stress on newly planted crops, according to a Bloomberg report. This year, the region from central Argentina to southern Brazil has received less rain than at the start of the severe drought two years ago.
“The dry weather in parts of South America is intensifying,” said Mark Schultz, the chief analyst for Northstar Commodity
Argentina, the world's third largest soybean exporter, likely won't be able to produce as many soybeans as previously expected due to dryness. “Export demand remains strong and the market is expected to build lightly on the gains yesterday as outside markets are quiet and as fundamentals remain bullish,” according to Doane Market Outlook Report.
Dryness in South America is a "very serious issue" for soybean production, said Don Keeney, meteorologist for MDA EarthSat Weather, a private forecaster. Brazil, the world's second largest soybean exporter after the U.S., also needs rain in the south.
Source: Dow Jones Newswire, Bloomberg, Doane Outlook Report