Rain needed soon in Argentina, prices react
Scorching hot weather and cloudless skies across Argentina's farm belt have farmers worried about the developing corn and soybean crops. That has pushed up grain prices as markets fret that expectations of bumper harvests in Argentina and Brazil might fall short of what's needed to rebuild global grain stocks.
Argentine fields have suffered from hot, dry weather this month. Farmers are praying that storms expected for Friday and next week will give their thirsty crops enough water to avoid a drop in yields.
"It's normal for January to be dry [in Argentina], and nothing is critical yet," said Buenos Aires Cereals Exchange crop analyst Esteban Copati.
"However, rain is needed soon and yields will fall if February doesn't see showers," he said.
Only a few isolated fields are facing critical dryness, but the problems will spread if there isn't rain soon, Mr. Copati said.
Grain markets are on edge, with U.S. soybean futures settling at a six-week high on Wednesday, boosted by a drier weather forecast for crops in Argentina.
Chicago Board of Trade March soybeans settled up 27 cents, or 1.9%, at $14.78 3/4 a bushel, the highest settlement for the front-month contract since Dec. 17. Corn futures are trading at seven-week highs.
"South America has been the principal focus of the soybean trading over the last two weeks," said Bill Nelson, analyst with advisory firm Doane Advisory Services in St. Louis, Mo. "The market has been acutely aware of changes in the forecast."
"Without a doubt this cocktail of little rain and the hottest temperatures are the least-wanted for crop development, and this is the situation we're facing," according to a report from Argentine grain brokerage Granar SA.
Brazilian farmers are just starting to harvest their soybean crop, which is expected to rise 25% on the year to a record 83 million metric tons. Brazil is battling the U.S. for the world's top spot as a global soybean exporter.
Argentina ranks third in global soy exports, but is the leader in soymeal and soyoil exports. Exports of grains and related products are the country's No. 1 source of foreign currency.
Argentina's farmers are just wrapping up soybean planting, which was delayed due to flooding in late 2012.
Early hopes that production would hit 55 million tons this season are probably overly optimistic, the Buenos Aires Cereals Exchange's agricultural weather analyst Eduardo Sierra said.
"Expectations will have to come down a bit. It's going to be a good season, but not a great one," Mr. Sierra said.
He added that he sees Argentina's final soybean output at around 50 million tons, still the second-largest crop on record.
Argentina's farmers are finishing the last of the late corn planting.
The corn harvest will likely hit a record 26 million tons, but will fall short of early expectations of around 28 million tons, Mr. Sierra said.