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Markets eye SA weather, demand

Ray Grabanski 10/24/2012 @ 3:32pm President, Progressive Ag www.progressiveag.com

The U.S. growing season is ending for corn and soybeans, but the South American (SAM) growing season is just beginning.

The focus of the market is shifting from the U.S. growing season (first a drought, then a realization that yields were better than expected) to SAM. 


U.S. soybean harvest is now 80% complete, well ahead of normal at 69% complete and indicates that the attention on the U.S. growing conditions is waning, and attention is now being averted to the SAM growing season. 


Pro Ag final yield models for soybeans indicate a 39 bu/acre crop. So it's likely that USDA will hike the production number again in the November report, this time to near the Pro Ag yield number at 39 bu/acre from current estimates at 37.8 bu/acre. 


USDA made a huge hike higher in the October report, upping production 9% with a hike in yield of 2.5 bu/acre and a hike in planted acreage of over 1 million acres. If USDA hikes production again to 39 bu/acre in the November report (and private estimates will soon be out on that in the coming weeks), that means an increase in production of about 90 mb. That will ease the U.S. ending stocks number a bit, as the tight 130-mb ending stocks number in October is still a bit concerning to the soybean market. 


Of course, USDA could also hike U.S. soybean exports again, as soybean exports are on fire recently (last week over 60 mb in sales)! And besides, they hiked them 20% in the last October report (a full 210 mb). 


Now the attention is turning to the SAM growing conditions, with full planting now under way there. Some areas are wet in southern Brazil and Argentina, but dry weather in northern Brazil is causing some concerns. Today's forecast calls for this pattern to continue another week, but abrupt changes for the 8- to 14-day forecast are exactly the opposite - wet in northern Brazil and dry in southern SAM. That would be just what the doctor ordered to improve conditions there. So we'll have to see if that forecast is verified in the coming days. Soybean futures prices have rallied from recent new lows about 80 to 90 cents on this recent SAM crop concern; there is a fair amount of premium in there for the weather concerns out of SAM.  

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