On Tuesday, USDA released the December World Agricultural Supply and Demand Estimates (WASDE) report. Most analysts considered the report neutral or friendly for corn and soybeans. Corn ending stocks were slightly lower than market expectations and soybean stocks were slightly higher than the previous report. According to Jim Bower of Bower Trading, it’s now time to keep a watchful eye on South America.
“To summarize [the WASDE report] it appears that the market had a dagger hanging over its head and that dagger seems to be have been removed,” he says adding that South America could change the picture in January.
Bower, who has followed South American crop production for a long time, says Brazil’s growing season is going very well so far.
“Probably the area that's got the most potential for a problem is in the northeast quadrant,” he says. “That's normally coffee, cocoa, sugar, and oranges, a California type style situation.”
He says the critical region for grain farmers to watch is Mato Grosso. While Brazil is having a fine start, Argentina is struggling.
“Argentina hasn't had a good spring at all,” Bower says. “Planting has been a problem. It’s too dry and too hot with temperatures up to 100 degrees in some areas.”
According to Bower, some weather models show an improvement in the forecast for Argentina, but he cautions forecasts change.
“Brazil will be OK or good,” he says. “Argentina put an asterisk by it, we've got to watch it closer.”