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Rally Likely In Soybean Amid Lower Rainfall In Brazil, Argentina

25 Oct 2019 10:47 am
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MUMBAI (Commoditiescontrol) - A lower crop in the US in 2011 followed by poor harvests in Brazil and Argentina eventually led to US$17 per bu. prices.

It hasn’t been a market mover yet but the poor start to South America’s 2019-20 soybean crop is raising some eyebrows.

The accumulated 60-day precipitation level for the key soybean-growing areas of Brazil was 66 millimetres as of Oct. 18, which was 52 percent below normal.

The same goes for Argentina, where it was 35 percent below normal.

“It definitely is a problem,” said Rich Nelson, chief strategist with Allendale Inc.

The market hasn’t priced in the dry start to the planting season because it knows yields are determined by weather conditions in December and January.

Nelson said the last time there was a short crop in the United States followed by disappointing harvests in Brazil and Argentina was 2011. That eventually led to a rally that pushed prices beyond US$17 per bushel.

“The market didn’t start rallying until December,” he said.

Drew Lerner, president of World Weather Inc., agreed that conditions have been less than ideal.

“Rainfall has been below average over a fairly large part of important crop country in Brazil,” he said.

“My forecast from the very beginning is that it’s going to be a good year, but we’re already looking a little scary now.”

The driest areas are Mato Grosso do Sul, southern Goias, southwestern Mato Grosso, pockets of Sao Paulo and northern Parana.

“I was visiting with one of my customers who is down in the border of Parana and Paraguay and he said this is the driest it has been since 1985 on his farm,” said Lerner.

The Soybean and Corn Advisor website reports that a significant amount of soybeans will have to be replanted in certain regions of Parana due to poor germination.

Scorching hot temperatures of up to 47 C are causing a “rapid depletion” of any available soil moisture in Brazil’s second-largest soybean producing state.

Lerner said it is far from a lost cause for Brazil’s soybean crop. Weather models out of Europe and the U.S. were forecasting rainfall for the country over the next couple weeks as of Oct. 18.

He was siding with the European model that was predicting more sporadic, uneven rainfall for the soybean growing region.

“If the rains over the next two weeks turn out to be pitifully poor, then it does raise a red flag,” said Lerner.

Argentina doesn’t start seeding soybeans until November but it has been dry in the western half of the country and there was no immediate relief on the horizon.

Again, he feels it is too early to be fretting about the South American soybean crop.

“I’ve seen slow starts like this in both countries and we’ve come out of it OK,” said Lerner.

What does concern him is the delayed planting in Brazil. That could impact the country’s safrinha or second corn crop.

If planting of that crop is pushed back until February, that means it will enter the reproductive phase during Brazil’s dry season.

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