Evening Report (VIP) -- November 6, 2012

November 6, 2012 09:24 AM

CONSULTANT LOWERS ARGENTINE CORN CROP ESTIMATE... South American crop consultant Dr. Michael Cordonnier lowered his estimate of Argentina's corn area as well as its yield due to wet weather, resulting in a 3.5-MMT cut to his crop estimate to 22.5 MMT. Dr. Cordonnier reduced his corn acreage estimate by 10% from his previous peg and his yield forecast by 5% from trendline.

Dr. Cordonnier reports local officials estimate that 4 million hectares in Buenos Aires and 3 million hectares in Santa Fe have been impacted by flooding. "One of the concerns in Argentina is that the wettest areas are also the best production areas of the country -- notably northern Buenos Aires, southern Santa Fe and southern Cordoba," he says, noting these three provinces produce more than 80% of Argentina's corn crop.

Corn planting in the country is around 40% complete compared to 60% on average. "Some of the crop that had already been planted was flooded out by the recent heavy rains and it will now need to be replanted when the fields dry out," says Dr. Cordonnier. "Ideally, farmers would like to plant their corn in September or October and they generally shy away from planting corn during November because... pollination will occur during what is traditionally the hottest time of the summer. In order to avoid a problem with pollination, many farmers would prefer to skip planting corn in November and complete planting their corn in late November or early December. That strategy works better in northern Argentina where the growing season is longer, but it could be a problem in southern Argentina where the growing season is shorter."

Dr. Cordonnier says if the wet patter persists, Argentina's corn production estimate could decline even more.



ARGENTINE SOYBEAN ESTIMATE UNCHANGED, BUT ACREAGE COULD INCREASE... Dr. Cordonnier left his estimate of the Argentine soybean crop unchanged at 56 MMT, but says there is a possibility acreage will increase and yield will depend on when the crop eventually gets planted and weather the remainder of the growing season. "Conversely, there is also the possibility that the soybean acreage in Argentina could also decline if the current wet pattern is not broken," he says.

Just 4% of the crop has been planted compared to 14% last year at this time, but Dr. Cordonnier stresses there is still plenty of time to get the crop in the ground. "If the wet conditions prevent farmers from planting all their intended corn acres in a timely fashion, or if the flooded out corn cannot be replanted, you would assume that the majority of those acres could be switched over to additional soybean production," he says. "Therefore, I do anticipate that the Argentine soybean acreage will eventually increase, but at this time, it's too early to say by how much. There is also the possibility that some of the flooded acres may not get planted to anything this growing season."

Meanwhile, Oil World says Argentina's 2012-13 soybean crop could come in 3 MMT to 6 MMT below some forecasts of 55 MMT to 56 MMT due to the extremely wet conditions. The publication says, "The situation is rather alarming in Argentina where an estimated 13 million to 16 million hectares of agricultural land is either flooded or excessively wet at the moment. Although farmers will make every effort to sow soybeans even at a later time and with a reduced yield potential, it is still unclear what they will finally be able to accomplish."



MATO GROSSO SOYBEAN PRODUCERS REPLANTING... Dr. Cordonnier says numerous producers in Mato Grosso, Brazil, planted their soybean crop after the first initial rains hoping the rainy season had begun -- but they guessed wrong and are now waiting on additional rains to replant soybeans. Fortunately for those producers, rains fell on the region over the weekend and more are in the forecast for this week, but replanting now will prohibit these farmers from planting a second crop of corn or cotton after these soybeans are harvested.

Dr. Cordonnier left his Brazilian soybean crop estimate unchanged at 80 MMT. Around 38% of the crop has been planted, which is 10 percentage points slower than last year at this time. "It's too early to say the 2012-13 soybean crop in central Brazil will be disappointing, but the odds for a record crop in this region are now probably quite low," he adds.



CONSULTANT: BRAZILIAN CORN PROSPECTS A 'LITTLE MORE UNCERTAIN'... Dr. Cordonnier says the prospects for the Brazilian corn crop are a little more uncertain than they are for soybeans as planting of the full-season crop is getting underway later than usual and planting of the second-crop corn (safrinha) may also occur outside of the optimal planting window.

"At the start of the growing season, we assumed the increase in soybean acreage in central Brazil, especially Mato Grosso, would also result in increased acreage of safrinha corn. With the delays in soybean planting and the need to replant some of the soybeans in Mato Grosso, it is uncertain if the safrinha corn acreage will increase significantly compared to last year," says Dr. Cordonnier. "Additionally, the safrinha corn yields could also be impacted by a delayed planting of the crop. It is not certain if either of these two things will occur and the corn crop needs to be watched carefully. Therefore, the Brazilian corn estimate was left unchanged this week at 72 MMT, but with the caveat that there is a greater downside risk for the corn crop than upside potential."



EIA SEES FURTHER SOFTENING OF CRUDE OIL PRICES... In its Short-Term Energy Outlook, the Energy Information Administration (EIA) projects the West Texas Intermediate (WTI) crude oil price will average $89 per barrel in the fourth quarter, about $4 lower than last month's outlook. WTI crude oil is forecast to average $88 per barrel in 2013. Meanwhile, EIA says U.S. regular gasoline prices are projected at $3.59 during the fourth quarter, although Hurricane Sandy's impacts on the East Coast contribute to uncertainty over the near-term price outlook. Gasoline prices are forecast to average $3.44 in 2013. Click here for more from Pro Farmer's Inputs Monitor.


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