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22/01/2018 0:00 - Agricultural Commodities Market
Soybeans and Corn Worried about “La Niña”

"La Niña" intensified and will remain in our country for the rest of the campaign, increasing the likelihood of drought and lower yields for soybeans and corn. Brazil is also affected, with more than 50% of both crops growing in dry conditions. Chicago prices reacted with rises in the week, although competition from Brazilian exports for US deliveries limits the profit.

In the interview conducted by GEA, Dr. José Luis Aiello warned on Wednesday that the phenomenon of "La Niña" - which is usually associated with a shortage of rain in our country - intensified and will unfortunately accompany us during the rest of the commercial campaign.

This fact is very worrying for both soybean and corn crops. In the first place, a very dry February is expected, and this is precisely the month of the year when soy’s yields are defined in a large part of Argentina, since it is when the plant produces its pods and subsequently begins with the "filling of grains". The filling of grains is the critical period and water deficiency may bring irreversible consequences. In the case of corn, the critical stage is flowering, and the early planting corn has already had the misfortune of overpassing it in dry conditions. Now, the expectations are placed on the late sowing corn, whose flowering begins precisely on February, so it could suffer the same fate, with serious consequences on yields.

In the following map, made by the Strategic Guide of Agriculture (GEA) of our institution, the evolution of soil moisture can be observed comparing the situation of January 10 with that of January 17. Although there were specific areas that improved their situation, such as the south of our province (Santa Fe) and parts of Córdoba, these were precisely the areas that, in general and relative terms, required water in a less pressing manner. That is, in the rest of the central region -mainly in the north of the province of Buenos Aires- the soil was very dry last week and unfortunately it continues the same: the crops are having a bad time.


Analysis of Brazilian Situation

As it is well known, our neighboring country has seen an increase in its production and exports of soybeans and corn in recent years, taking the first place from the United States in the case of the oilseed. Therefore, whatever happens with Brazilian production will have a significant effect on international prices and, consequently, on the values of these grains in Argentina.

For the time being, Brazil also experienced lower than normal rainfall in most of its territory, as it can be seen in the following chart prepared by the Climate Prediction Center (CPC) of the National Oceanic and Atmospheric Administration (NOAA) of the United States. It is observed that a large part of the country experienced pluvial deficits of between 15 and 50 millimeters, depending on the region.


To make a more detailed analysis, the attached table shows the participation of each Brazilian state in the national production of soybeans and corn, which allows a more accurate damage calculation. Specifically, the states of Mato Grosso, Mato Grosso do Sul and Goiás have a water debt of approximately 50 mm, and 62% of the Brazilian soybeans are produced here. In the case of the cereal, if we add the state of Minas Gerais (another very dry state) to the previous ones, it is obtained that in total they contribute 53% of the country’s corn, so this crop is not saving itself from the drought. To sum up, more than half of Brazilian soybean and corn production is threatened by the drought . The good news is that Paraná, where 17% of soybeans and 23% of corn are produced, had rainfall between 15 and 75 mm higher than normal, which is beneficial for both crops. At the same time, Rio Grande do Sul, where 10% of the Brazilian production of the oilseed is generated, mostly had a normal level of rainfall.


Prices Reaction in Chicago Board of Trade

Worries about a shortage in South American production as a result of a dry season originated a recovery in the price of soybeans and corn in the Chicago market, but without reaching the values that were negotiated towards the end of last year. It happens that profits are limited by the strong competition that Brazil is presenting to the United States as a world supplier of grains so far in the American commercial campaign of coarse grains 2017/18 (which began on September 1).

Until December inclusive, Brazil exported 6.5 million tons of soybeans, twice as much as in the same period of the previous year, while shipments from the United States totaled 30 million tons, 15% below the September-December period of the previous year. The most worrying fact for the US is that this quarter is when their harvest takes place, so it is usually when the highest volume of exports is registered in relative terms.


In the case of corn, Brazil's participation in the international market was also very strong towards the end of last year. Exports of 18.5 Mt between September and December 2017 tripled those of the same period of the previous year, although they remained 8% below those of 2015 in the same period. In any case, Brazilian corn exports in calendar year 2017 reached a historical record of 27.3 Mt. Meanwhile, the United States exported a total of 11.5 million tons of corn between September and December 2017, a 30% less than in the same four-month period of 2016.

In Rosario Board of Trade, prices replicated external earnings and at the end of last week the reference values reached AR$ 5,060 / t for soybeans and AR$ 2,840 / t in the case of corn, surpassing in both cases the average of the previous week, which had been AR$ 4,977 / t and AR$ 2,830 / t, respectively. For the next few weeks, the links of the agricultural chain are expected to be more attentive to the sky than to the screens, since what happens with the weather in the next month will determine the fate of the South American coarse grains campaign 2017/18.


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Institutional Video of the Bolsa de Comercio of Rosario (Rosario Board of Trade)

 Rosario Board of Trade

The Rosario Board of Trade is a centennial institution located in Rosario, in the most important agroindustrial zone of Argentina. Throughout its history it has created and boosted transparent, solid and reliable markets: the Grains Physical Market, the Futures Market, the Capital Market, and the Livestock Market.

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Bolsa de Comercio de Rosario Córdoba 1402 - S2000AWV
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