The farm markets will continue to actively eye the corn and soybean production progress in Brazil and Argentina.
Because South America’s growing season varies widely, everything from crop progress, weather updates, harvest progress and yield reports, and transportation issues are all in play during the month of February.
This week, the Brazil soybean crop was being called amazing by some, while Argentina’s soybean losses from flooding were still being assessed.
Both the crops still in the ground and the yields from the harvest activity in the state of Mato Grosso, Brazil’s largest soybean-producing region, were coming up roses.
As of Sunday, Brazil farmers had harvested 2.2% of the crop, ahead of the 1.5% pace from a year ago, and ahead of the 1.2% five-year average, according to AgRural consultancy.
Individual states such as Mato Grosso had 11.5% of this year’s soybean crop harvested, up almost 8% from its pace last year. Mato Grosso do Sul farmers were 1% complete; Goiás and Minas Gerais both less than 1.0%.
So far, the farmers in Mato Grosso have reported soybean harvest yields between 53.33 and 57.99 bushels per acre. In the southern state of Parana, farmers report yields ranging from 56.2 and 61.56 bushels per acre.
For the rest of the month of January, wet weather is expected to delay harvest activity for the states of Mato Grosso, Mato Grosso do Sul, Goiás, São Paulo, and Minas Gerais, according to Climatempo, a Brazilian weather company.
Meanwhile, favorable soybean harvest weather is expected in Brazil's southern states of Paraná and Rio Grande do Sul.
Though rain events could slow harvest in parts of the country, Brazil’s soybean output for 2017 is expected to be record-large.
The latest soybean production estimates released by Brazil’s National Supply Company (Conab) estimates an increase of 8.7% compared to last year.
With an estimated area of 84.0 million acres, Brazil’s farmers are expected to grow 103.5 million tons of soybeans, greater than Conab’s December estimates of 102.3 million tons.
Brazil’s total 2017 corn production (first and second crops) is pegged at 84.480 million tons, according to Conab. However, AgRural, a private Brazilian consultancy firm estimates total corn production at 88.6 million tons.
Brazil’s farmers planted and estimated 39.34 million acres of corn in 2017, the majority of this total associated with the second crop (safrihna) crop.
So, Brazilian farmers have a big crop coming on. The question is will they put it on the market all at once? Not exactly.
While farmers were active sellers in December, January’s exchange rate fell out of bed. The U.S. dollar weakened to Brazil’s real, and the farmer-selling faded. In late January, one U.S. dollar equaled around R$ 3.19.
Farmers get paid in dollars. Last year, prices reached R$ 100 per bag of 60 kgs. This year, prices for a bag of soybeans is around R$ 60 to R$ 65 per bag.
Just as Brazil and Argentina are expected to produce more soybeans in 2017, (a combined 102 to 106 million metric tons), smaller countries expect to raise South America’s total even higher. At the same time, some other few countries will have a higher output.
Paraguay is seen producing 9.30 million metric tons of the oilseed (13% more than the previous crop). In Uruguay, after lower output from last year’s lack of soybean seeds, the country would harvest 3.5 million metric tons of soy, according to the newest estimate of the Association of Oil and Grain Exporters of Paraguay.
The British group AHDB says that both countries represent together 4% of global soybean supply and have been out of the scope for a lot of analysts. On the other hand, it is still early to tell if Argentina’s losses would be totally compensated by these two countries. Estimates of losses range from 2 to 8 million metric tons. Argentinian farmers have yet 10 days to finish planting or rework.
The soybean market is performing well, despite solid world supply numbers.
Jason Ward, Northstar Commodity Investment Co. says the USDA’s January WASDE estimates for South America remain big but not surprising to the market.
“We digested a big increase in Brazil production and still world soy stocks declined. Argentina likely has some room to move down on production, especially if wet weather continues,” Ward says.
Compared with the USDA’s previous estimates, the USDA left production estimates unchanged in January, for both Argentina or Brazil.
USDA left Brazil’s 2017 corn output at 86.50 million metric tons, and that country’s soybean production at 104 mmt, up 2 mmt.
Argentina’s estimates, in production, were left unchanged for its corn and soybean output.
Meanwhile, in its January WASDE Report world corn ending stocks were dropped by 1.3 mmt or 51.16 million bushels. World soybean ending stocks declined by 600,000 mmt or 22 million bushels. World wheat ending stocks increased by 1.2 mmt or 44 million bushels.