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The weather and crop conditions in South America still are attracting chatter. The corn crop in Argentina has been substantially reduced (the USDA estimated 29 mmt in December and 26 mmt in January, with many private estimates now around 21 mmt) due to La Nina type drought. For soybeans, with much of the important yielding determining weather still to come, estimates are around 46 mmt. The USDA in January was 50.5 mmt.
This La Nina dryness hits southern Brazil as well, causing the overall Brazilian corn crop to be reduced maybe 5 mmt to 56 mmt, according to analysts. The soybean crop may also be down 4-5 mmt to 70-72 mmt.
OK, that’s a lot of numbers. What does it all mean?
The theory the supply situation would be ample after South American harvest is now being questioned. For example, even though the Argentine corn crop is much smaller than Brazil’s (and downright tiny compared to the U.S.), they are still the number two corn exporter in the world. As such, everyone pays attention.
For soybeans, Brazil is basically an equal-sized exporter compared to the U.S. Plus Argentina wins the award for largest exporter of meal and oil. Again, everyone pays attention.
South American shortfalls have a ripple effect on the U.S. supply/demand situation. U.S. exports could be increased in the current marketing year, but exports could also be increased for new crop. As such, a supply reduction in South America can put a more positive spin on the U.S. situation for a long period of time.
The USDA has an opportunity to begin to address this shift in supply and demand when it issues its latest WASDE on Thursday, February 9th. It will give the USDA’s forecast of crop sizes and could start to show increased demand for U.S. corn and soybeans. Given the tight corn situation, this increased demand could cause a small carryout to become even smaller.
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