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USDA: South American drought trims world soybean, corn production

Agriculture.com Staff 02/10/2009 @ 6:58am

It's been awfully dry in South American soybean and corn country. USDA on Tuesday confirmed the drought down south has taken a toll on the region's crops and, in turn, soybean and corn supplies in the world market. Will this translate to a shift in acres in the U.S. this spring?

The soybean crop took the biggest hit in Argentina, where overall production is pegged at 43.8 million tons. That's down 5.7 million tons from a month ago "as drought conditions and heat in the central growing area has resulted in lower projected harvested area and yields," according to Tuesday's USDA World Supply and Demand (WASDE) report.

The Brazilian crop is seen 2 million tons lower at 57 million tons and the crop in Paraguay is seen down 1.6 million tons at 4 million. The net effect on the South American drought, USDA expects, is a reduction of 9.1 million tons to world production, which is now pegged at 224.1 million tons.

Despite a tighter world supply situation, U.S. soybean exports remain strong. USDA on Tuesday raised export estimates by 50 million bushels to 1.150 billion overall, "as export shipments continue to exceed earlier projections, primarily for China," according to USDA.

The corn crop didn't escape the South American drought conditions unscathed. Argentina's crop is projected 3 million tons lower than thought a month ago, according to USDA. Brazil's crop is seen 2 million tons lower, and Paraguay's is 0.8 million tons lower, "reflecting a return to dryness in late January that limited soil moisture during grain fill in drought-affected southern growing areas," according to Tuesday's WASDE report. As a result, USDA sees world corn production for 2008-2009 at 4.6 million tons lower than it was a month ago.

Will these numbers -- and their corresponding effects on the CBOT grain trade -- have any influence on planting decisions this spring? It's not really a factor in the corn trade, but when it comes to soybeans, the pressure created by a small crop in the southern hemisphere might add incentive for U.S. farmers to plant more beans.

"Certainly, if the crop continues to get smaller -- and there's some indications that Argentina's soybean crop is going to get smaller yet -- the soybean market will need to keep its edge. With the reduction in soybean acres in South America, soybeans look like they will take a few acres away from corn," says Brian Hoops, market analyst with Midwest Market Solutions. "We do need a bigger South American crop or else we'll need to plant more soybeans here."

It's been awfully dry in South American soybean and corn country. USDA on Tuesday confirmed the drought down south has taken a toll on the region's crops and, in turn, soybean and corn supplies in the world market. Will this translate to a shift in acres in the U.S. this spring?

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