What Traders are Talking About:
* Dryness the new concern in Argentina. Argentina suffered from excessive wetness through much of the country's cropping region until recently. Instead of the persistent, heavy rains seen through November and December, conditions have turned hot and dry, prompting concerns about how this year's crop will finish, especially since plantings were delayed and not all crops have been seeded yet. A Pro Farmer Member in Argentina says, "In my opinion, if rains don't develop promptly and on a regular basis with so much of the crop sown so late, yields will fall very fast." He says there's already talk in the country of the soybean crop coming in below 50 MMT. USDA has the Argentine soybean crop at 54 MMT. Pro Farmer South American consultant Dr. Michael Cordonnier lowered his Argentine soybean estimate by 1 MMT to 53 MMT this week. Soybeans are the focal point, but there are also concerns with how Argentina's corn crop will finish. Late-season dryness would very likely be more damaging to corn yields. Because of those concerns, Dr. Cordonnier is left his Argentine corn crop estimate at 22.5 MMT, which is well below USDA (28 MMT) and the Argentine government (28 MMT to 30 MMT).
The long and short of it: Dryness concerns in Argentina are getting much more attention. While production is forecast to be up sharply from last year's drought-impacted crops, falling crop forecasts can still be price-supportive.
* Record South American soybean crop a virtual certainty. In speaking with Dr. Cordonnier yesterday, I posed the question about whether potential late-season problems could keep the South American crop from being record large. He indicated a record Brazilian soybean crop is almost a certainty as there's 5 MMT to 6 MMT of "slack" to work with. Because of the strong Brazilian crop and what's still expected to be a decent Argentine crop (even if production estimates fall some), South American soybean production will be record large. Strange things can happen if the weather turns persistently hot and dry, but record South American soybean production is a virtual certainty.
The long and short of it: As stated above, record South American production doesn't mean prices can't rally if crop estimates fall from earlier expectations.
* Argentine to cap corn exports?Rumors Argentina could cap corn exports as supply uncertainties are on the rise have been swirling through the market the past two days. Although there has been no official announcement, there seems to be some fire behind the smoke. The number I've heard is that exports may be capped at 10 MMT until more is known about this year's crop.
The long and short of it: A cap on Argentine corn exports could have significant implications for corn and wheat. With U.S. corn supplies very tight and global end-users actively seeking alternatives, a cap on Argentine corn exports could further boost feed wheat demand and may prompt end-users to get more aggressive in their pursuit of U.S. corn.
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