- What one day takes, another day gives back! This morning’s weather news in S America showed the two models (EU and GFS) to be in agreement with an expansion of rainfall across C and N Brazil whilst maintaining an unwelcome pattern of showers across N Argentina. Shorter term dryness concerns across Goias and Minas Gerais in C Brazil will ease somewhat although longer term patterns may well change and concerns would rise accordingly. Weather models do suggest that dryness will return to around 25% of the NE Brazilian agricultural belt in the second half of January. Only Bahia in the far NE of the country, which accounts for around 5% of soybean production, will be left drier than normal in the coming ten days or so according to forecasters. Clearly Brazilian weather has improved when compared with late December but too much rain will continue to fall across the northern half of Argentinian agri belt in the remainder of January leaving question marks over unplanted acres and lost output.
- Chicago markets are mixed with less than an hour to go, soybeans are holding onto gains whilst the grains, corn and wheat are in negative territory. The trade is attempting to comprehend and balance the S American weather and its overall impact upon soybean output with Brazil seemingly positive at present whilst Argentina is struggling.
- CONAB estimated their 2017 Brazilian corn harvest at 84.5 million mt, up 700,000 mt from their December forecast, and up 17.5 million mt from last year. WASDE projected the 2017 Brazilian corn crop at 86.5 million mt. We note that the WASDE December forecast had the 2017 Brazilian soybean crop at 102.0 million mt and the Argentine 2017 soybean crop at 57.0 million mt. Most S American market watchers now place the Brazilian soybean crop at 104 million mt and Argentina at 52.0 million mt, which on a combined basis is still short by 3 million mt from the December WASDE forecast. January’s WASDE offering will make interesting reading when released on Thursday.
- Our view right now is that it is far too soon to project a big drop in Argentine soybean output given the chances of a drier spell for the wetter north of the country and better rainfall chances in the drier south. Until we see a confirmed adverse weather situation in S America, Argentina in particular, we would tend to pull away from a bullish stance.