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Keep eye on the southern sky
Southern South America has been dry since about Jan. 1, at a critical time in the development of the South American (SAM) crop.
This is the equivalent of July 1 for US producers, so this is a critical time in the
development of the SAM crop. If dry weather persists from here, it could spell significant drops in yield potential for southern SAM, and would be a particularly bullish scenario now that we know that US stocks of corn are low.
On the other hand, a change in the weather pattern starting in the next seven days would be a different situation indeed. It was wet in southern SAM up until Jan. 1. So, there was soil moisture in Argentina and southern Brazil that crops could rely on for awhile. Anyway, they needed dry weather to allow planting of the remaining crops in Argentina (wet weather was delaying planting up to that point).
At the same time, northeast Brazil was dry going into January, and wet weather since then has improved yield potential of the northeastern Brazil crop as well. If the current weather pattern which has been dry for southern SAM breaks (as is forecast today for the 8-14 day weather forecast), then a lot of southern SAM crop problems could be greatly improved.
So, this is a critical time in the development of the SAM crop. If the drought in southern SAM ends now, it could mean that the world will not run out of grain before the next US crop is harvested. That would be a critically important development in the world's grains supplies for now.
On the other hand, if the weather pattern does not change, then SAM could have another crop production problem in 2013 that prevents them from rebounding from the 2012 drought. With the US producing a 23% below 'trend' corn crop this year (an absolute disaster!) and a 10% below trend soybean crop, it was indeed a poor year for SAM to have crop problems again.
So, the weather pattern change forecast in the 8-14 day forecast is critically important right now to the grain trade. If the notoriously unreliable long range forecast is correct, then we could very well be facing the exact time when sales should be advanced for corn, soybeans and wheat. But, if the forecast for wet weather to return to southern SAM doesn't materialize, we will take grain prices even higher to allocate what could be a short south American crop as well.
So, this becomes decision time. The daily weather forecasts become more critically important now that the SAM crop is in its most critical stages of development, and it has just about run out of subsoil moisture. Now is crunch time - the fourth quarter in football terms!
Can South America turn wet in southern areas, and still come through with a normal crop or better in 2013? Or, will the weather pattern of drought continue the next few weeks, effectively pushing South America into another drought-reduced crop in 2013?
Keep an eye on the skies now, and the 14 day forecast for Southern SAM.
This is the time when weathermen are a grain traders' best friend, and having a good one on your side is important.
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