Porto Alegre, February 7, 2023 – Both the corn and soybean markets remain tense with the climate in South America. Figures from the US agricultural attaché, headquartered in Argentina, allowed speculation about a greater-than-expected crop failure in the country. The attaché seems to have just followed the data from the Rosario Exchange, practically ignoring the Buenos Aires Exchange and the information on the crop in the interior of the country. In any case, this picture now converges to the USDA’s report on the next 8th, and the central office must not necessarily follow the attaché’s data. The environment of apprehension with the Argentine crop starts to ignore even the Brazilian record crop as well as the capacity of Brazil and Paraguay to offset any Argentine deficiency over the coming few months.
World demand begins to converge to US corn. For another week, weekly sales topped the average of one mln tons, standing at 1.5 mln tons last week. This flow shift from Brazilian to US corn offers room for price support above USD 6.50/bushel on the CBOT. Some risks with shipments in Ukraine still offer some speculative space from the Black Sea side.
In the February report, the USDA changes for corn must be isolated, as there is still no consistent indicator to raise the projection for US exports again and generate an environment of greater support for prices. If this happens, for now, it will be a surprise. There must be little news or few changes for Europe, Asia, and the Black Sea.
The great expectation for this report is the data on South America. A report generated by the US agricultural attaché in Argentina projected the soybean crop at 36 mln tons, following the Rosario Exchange. However, the consensus today between SAFRAS & Mercado and the Buenos Aires Exchange is for a crop of around 42 mln tons. Of course, the Argentine weather scenario is not comfortable, which makes this type of production projection more pessimistic, as some entities do with data on Rio Grande do Sul.
For corn, Safras & Mercado cut production to 47 mln tons, from an initial projection of 55 mln, and the numbers are still completely subject to change. The crops planted from the end of last November will go into pollination and silking from February now, allowing a more adjusted projection for production after pollination. We are talking about two different situations. Between Santa Fé and the border with Paraguay are the consolidated and irreversible losses, already priced by the market. Córdoba and Buenos Aires still have better conditions and still healthy production projections. There is also the possibility that the north of the country carried out later plantings or even replantings at the end of January.
In January, rainfall was between 75 and 150 mm, still below the average for the country and the producing regions, which also cope with limitations to solve the issue of drought definitively or offer comforting signs for the production projection. As more than 50% of the area planted with corn and soybeans was cultivated in January, most of the crops in the Nucleus are entering pollination and blossoming from this month. So, we still have sixty days of weather to define the size of the Argentine crop, and some cuts currently projected could be a reality in March or April, but not today, and will still depend on the weather in the period.
This tense environment created strong expectations for this USDA February report. Part of the market wants to see USDA projecting 36 mln tons for soybeans and 43 mln tons for corn in Argentina. We do not believe USDA will release such numbers, and the consensus is 42 and 47 mln tons, respectively. Besides, the market ignores the excellent yields that have resulted from the soybean harvest in Brazil and even the corn harvest, except for Rio Grande do Sul. When will the market understand that this year’s losses in South America are different from those in 2022? For the time being, this price movement is quite helping Brazilian and Paraguayan growers, who still have healthy prices with excellent production.
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