"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
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
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.