Brazil Forecasts Record Soy, Corn Crops

February 7, 2013 12:24 AM

What Traders are Talking About:

* Brazil forecasts record soy, corn production. Conab, the supply agency of the Brazilian government raised its soybean crop estimate to a record 83.4 MMT from 82.7 MMT last month. Conab also raised its corn crop estimate to a record 76 MMT from 72.2 MMT in January. Of the corn total, 40.9 MMT is expected to be safrinha (second season) production. Because safrinha corn yields can vary greatly based on when the rainy season ends, there could be a lot of movement in the Brazilian corn estimate.

The long and short of it: The record soybean crop is not a surprise, as weather has been generally favorable for the majority of the crop through the growing season. The record corn forecast, however, is more of a surprise considering safrinha corn planting is just getting started.

* Rains still in forecast for Argentina, but fading. Argentina is still in line to get rains next week, but some forecast models have pushed back the event and reduced amounts and coverage levels. Rains are generally expected to favor northern areas of Argentina's main grain production region, while southern locations are expected to remain mostly dry. Meanwhile, moderate to heavy rains are expected across southern Brazil, which will benefit the crop. But rains in central Brazil will continue to hamper harvest efforts there.

The long and short of it: If Argentine rain chances continue to fade, it could trigger fresh buying as the outlook for rains has pressured corn and soybean futures this week.

* Russia may buy global grains for gov't reserves. Russia earlier this week approved the removal of the 5% duty on grain imports in a move that's hoped will alleviate tight supplies and rising domestic prices. It's anticipated the red tape will be cleared for imports to start by April. Now local media is reporting Russian Ag Minister Nikolai Fyodorov says the country may consider buying foreign grains to boost government intervention stocks if prices are right. Obviously, grain supplies are tight throughout Russia, not only what's held privately, but also government stocks.

The long and short of it: As I've previously stated, the U.S. won't likely benefit much from direct sales to Russia, but there should be an indirect positive impact on U.S. wheat demand. Of course, India has abundant wheat supplies and is actively looking to boost wheat exports, so they will directly or indirectly get some of the Russian business.


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