Following the drier than desired summer of below normal rains in South America, it appears that both Argentina and Brazil are off to a good start with their 2020 corn and soybean crops. Recent and projected rains in both countries have replenished soil moisture that was seriously lacking just a month ago.
The two-week forecast promises that much of South America is likely to be well-watered by the end of December, if forecasts verify. The next two weeks are also expected to bring rains to formerly dry areas of southern Argentina and northern Brazil, as well as key production areas.
"Conditions look favorable for both Brazil and Argentina," said DTN Senior Ag Meteorologist Bryce Anderson. "Dry sections of both countries are in line to have moderate to locally heavy rainfall during this week. Those areas are northeastern Brazil's Mapitoba region (portions of Maranhao, Piaui, Tocantins and Bahia states) and western Argentina -- specifically, the state of Cordoba.
"Elsewhere in Brazil, the states of Mato Grosso, Goias, Parana, and Rio Grande do Sul have had favorable rainfall to help get soybeans planted and into the vegetative stages. The rest of Argentina has had good rain for row crops as well," Anderson said.
The trade is now confident that should these projected rains materialize, both Argentina and Brazil may be headed for trend line yields, although it is very early to be too confident. There is a very long way to go, but some of the recent pressure on U.S. soybean and corn futures are a result of optimism for South American crops.
On Nov. 8, USDA's World Agricultural Supply and Demand Estimates (WASDE) pegged Brazilian soybean production at an all-time record large 123 million metric tons (4.5 billion bushels). Brazil's own ag agency, CONAB, projected a little less optimistic soybean crop of 120.9 mmt, up 470,000 mt from the previous month. The Brazilian Association for Vegetable Oil Industries (ABIOVE) estimated Brazil soy production at 122.8 mmt, up 4.2% from last year, and Ag Rural, a consultancy, has Brazil's soy production at 121 mmt. CONAB had projected Brazilian soy acreage to be up 2.3% versus last year at 36.7 million hectares, or the equivalent of 90.6 million acres (ma), with a yield of 48.7 bushels per acre (bpa). Production in 2018-19 turned out to be 117 mmt.
As of Nov. 7, Brazil soybeans were 67% planted, slower than last year's 71% pace, but higher than the five-year average of 57%. The key province of Mato Grosso is already 94% planted. Rio Grande so Sul, in southern Brazil has been delayed, due to the rain-delayed wheat harvest, and is just 20% planted versus 45% a year ago.
Brazil's corn crop, according to CONAB is projected to be 98.36 mmt. That is slightly lower than WASDE's 101 mmt projection from Nov. 8. Of CONAB's total, the fall season corn crop represents 26.6% and safrinha represents 72.1%. Brazil produced 101 mmt in 2018-19, following the drought-ravaged crop of just 82 mmt in 2017-18.
USDA's November WASDE report estimated the Argentine soybean crop to be 53 mmt. That compares to 55.3 mmt the previous year and the drought-ravaged 2017-18 crop of just 37.8 mmt. I have heard some private crop analysts projecting Argentina to be as high as 57 mmt.
With just 20% of Argentine beans planted as of last week, and following the past two to three months of extreme dryness, accurately predicting Argentine production is tough. Farmers have, in the past few months, sold soybeans and corn more aggressively than usual due to fears that the new government may choose to raise ag export taxes to help raise income to avoid a default. Argentina's economy has been mired in recession, with rampant inflation.
The new President, Alberto Fernandez, is unclear on policy at this point, and that could influence planting decisions going forward. An increase in taxes would surely lower the price to farmers. Argentine farmers will typically wrap up soybean planting by mid-January. Export taxes on Argentine soybeans are currently 25%, while those of corn and wheat are 7.5%.
The Argentine corn crop, which according to the Buenos Aires Exchange, was 44% planted as of last week. The crop is projected to be 50 mmt, which compares to 51 mmt in 2018-19. The corn crop was rated at 46% good to excellent, with 5% of the crop rated poor or very poor. Soil moisture as of last week was still rated 21% poor/very poor, but projected rains in the next two weeks should help to alleviate that problem.
Dana Mantini can be reached at email@example.com
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