- The potential for the dispute between Argentine farmers and the government to escalate to a higher plane is possibly one of the greatest market risks right now. The potential for interruption to soybean and product exports as well as grains is very real if the conflict extends. The Argentine government has formally declined to negotiate on the basis that the strike is motivated by a political agenda and farm unions haver declared a willingness to escalate action in an effort to force the government’s hand, or at least bring them to the negotiation table. The impact on the stricken Argentine economy is far from positive! Whilst it is reported that soybean stocks in export ports are “sufficient”, corn stocks are far from comfortable. As an example it would appear that the number of truck arrivals in the key port of Rosario were around 500 due to the strike and road blocks, this compares with a norm of something in excess of 4,000. If strike action is protracted this will not only affect exports but also the local crush.
- The next biggest market risk is likely to be weather and its impact on the developing crops in the northern hemisphere. US conditions appear to be improving and likely to assist in completion of planting as well as aiding crop development which may repair some of the damage done by planting delays. The specifics contained in yesterday’s planting report left us with concerns over the lengthy delay in soybean plantings, particularly in states such as the Dakotas and Minnesota, where we see a potential risk from early frost damage prior to crop maturity later in the season. Having said that, corn and soybean crop condition generally leaves little for concern at present.
- Reading between the lines it would appear that there will be corn acres unseeded as a result of weather conditions, and at least some of these will switch to soybeans with others being put into the preventative planting programme. In addition there would seem to be the opportunity for additional acres as a result of farmers in the Delta planting soybeans as a follow-on crop after early harvested wheat, particularly as soil moisture levels look advantageous right now. The potential is for soybean acres to reach around 79 million with the consequent knock on cap on new season prices – if it all goes to plan!
- Finally, Soc Gen issued a report warning of a significant price correction on corn as well as reduced soybean prices largely as a result of S American supplies. They continued that the record S American soybean crop was displacing demand from US sources and would likely continue through to Sep ’13. The likelihood of nearby premiums continuing would lessen they added. As always, time will tell if they are correct!