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South American update

Agriculture.com Staff 02/16/2007 @ 10:14am

The South American crops have had relatively few scares this growing season and are generally in good shape. In both Brazil and Argentina, the crop size estimates for corn and soybeans are on the high side of the range of estimates analysts were working with at the beginning of the season.

A problem area, however, is Mato Grosso, Brazil, where wet weather has increased concerns about rotting, poor quality soybeans during early harvest. This happened a few years ago and the pictures of sprouting beans were amazing and bullish for the market. This year, the slower than predicted harvest means export demand could continue for US beans for a few extra weeks. Also, the largest Brazilian crop estimate could be in the market, with coming estimates only steady or declining slightly. Look for something under 56 million metric tons.

Brazilian farmers are having the same discussion as Americans do they plant corn or soybeans in the coming season? Many farmers this year engaged in a compromise and planted very short season beans, to be followed by a crop of corn. If successful, this could continue to be an option. The high price of corn makes this practice much more viable, plus, while early maturity beans may yield less, they require less rust-controlling fungicide. The corn is destined for the export market.

USDA Baseline Projections

In past years, this report came out and barely made a ripple in the markets. This year, for some reason, many felt the report would contain valuable clues to ethanol use in the future. How disappointed everyone was yesterday when they realized the supply/demand tables were virtually the same as those used in the USDA budget information! The jittery markets sold off after the report was released during the middle of the trading day.

The market now has to wait for the Outlook Conference (March 1-2) for the latest version of the future from the USDA. Secretary Johanns and Economist Keith Collins have promised the USDA would spend some time this winter analyzing and rethinking the ethanol situation ad this conference is about the only remaining item on the calendar where they can discuss their conclusions.

The risk of loss in trading commodities can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial situation.

The South American crops have had relatively few scares this growing season and are generally in good shape. In both Brazil and Argentina, the crop size estimates for corn and soybeans are on the high side of the range of estimates analysts were working with at the beginning of the season.

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