South America to Be Focus of March WASDE Report

March 7, 2012 12:29 AM
South America to Be Focus of March WASDE Report

Analysts mixed on corn, but expect lower soybean numbers

All eyes will be on the South American corn and soybean crops this Friday when USDA releases its March World Agricultural Supply and Demand Estimates. Initial pre-report estimates are mixed on corn but lower for soybeans.

Looking at the corn crop first, Allendale expects USDA to lower Argentina’s corn production by 1 million metric tons to 21 million. The market research and brokerage firm based in McHenry, Ill., also expects USDA to decrease Brazil’s corn production to 60.5 million metric tons, a decline of 500,000 metric tons from USDA’s February estimates.

"Rainfall in Brazil was lower than normal in February in four of the top five provinces," says Allendale Research Director Rich Nelson. "In Argentina, we thought USDA did not drop corn enough in its February report." In USDA’s February WASDE report, the department lowered Argentina’s corn production from 27 million metric tons to 22 million. "We simply feel there is one last adjustment left for Argentina corn production," says Nelson.

Informa Economics has a different read of the upcoming report. The Swiss-based market research firm expects USDA to raise corn production estimates for both Argentina and Brazil. Argentina’s corn production could be raised to 22.5 million metric tons this year, up from USDA’s previous estimate of 22 million, while Brazil’s corn crop could be increased by 500,000 metric tons to 61.5 million metric tons.

Soybean crops shrink

Allendale and Informa agree that USDA will likely lower soybean production for both Brazil and Argentina. Allendale expects USDA to lower bean production in Argentina to 46 million metric tons and decrease Brazil’s output to 70 million metric tons, a decline of 2 million metric tons in each country from USDA’s February estimate.

"Year to date, U.S. soybean exports would imply a pace weaker than USDA's February estimate," says Nelson. "However, this next revision in South American production should encourage a higher export estimate."

Informa predicts USDA will lower Argentine soybean production by 500,000 metric tons to 47.5 million and drop Brazil’s bean production by 4 million metric tons to 68 million due to damage that occurred prior to the current beneficial rains.

The market is currently trading an Argentine soybean crop of between 46 million metric tons and 48 million tons, says Gregg Hunt, Archer Financial Services, Chicago. "Down the road, the Argentine bean crop could be back above 50 million metric tons."

Lower South American crops will mean more export business for U.S. suppliers, but not necessarily higher prices. "We expect increased U.S. exports for corn, soybeans, and wheat and therefore lower U.S. ending stocks," says Nelson. "We feel the increased export numbers are already priced into the market, based on the dramatic rallies we just had." He thinks prices could stabilize somewhat at current levels prior to the March 30 Prospective Plantings report.


Read more pre-report coverage of the March USDA reports.


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Spell Check

3/8/2012 12:50 AM

  USDA will raise both crops. Making the market drop is all they know how to do anymore!

3/8/2012 12:50 AM

  USDA will raise both crops. Making the market drop is all they know how to do anymore!

3/8/2012 02:57 AM

  I guess there was no need to even mention wheat since that price has already been knocked down more than $2 from a year ago.


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