Fundamentally Speaking

If weather in the last stretch of South America's growing season trends better, this will have far more beneficial impact on corn as opposed to soybeans and is one of the reasons why this market has not seen the advance posted by the soycomplex since the start of the year.

Corn down there is put in the ground later than soybeans so that crop has a better chance to come closer to earlier more optimistic projections as opposed to soybeans where the damage has already been done.

Argentina still has plenty of time to achieve a good crop and if the Brazilian soybean harvest accelerates, this could result in a faster pace of second corn crop seedings and maybe more acreage sown than first estimated.

Even so, last week's USDA WASDE report showed both Argentina and Brazil still having record high projected corn output with total production at 168 million metric tons (mmt), over 21% above the year ago total.

Much of this is due to all-time high acreage in both with planted corn area having advanced by 32% in Brazil over the past ten years and up a sharp 70% in Argentina.

Output however will be constrained by the fact that for a second year in a row the three largest South American corn producers are projected to have below trend yields, the first time that's happened since at least 2002/03.

This year Paraguay is seeing the worst negative deviation from trend since 2007/08 while Brazil off again after year ago worst yield vs trend in over 20 years.

This chart shows the harvested acreage in 1000 hectares in the right-hand axis and the percent deviation from 20 year trend for corn yields on the left-hand axis for Argentina, Brazil, and Paraguay.

USDA pegs the corn yield in Paraguay for the 2021/22 season at 4.00 metric tons per hectare (mt/ha), the lowest in ten years and 26% below trend which is the largest negative deviation since 2007/08 and the third lowest in 20 years.

Brazil's corn yield seen 3% below trend following up on the disastrous 2020/21 yield that was 21% below trend while the Argentine forecasted yield this year of 7.94 mt/ha also 1.4% below trend.

Should note as in soybeans USDA seen behind the curve in downgrading South American corn production so likely will see lower yields and perhaps less harvested acreage in subsequent WASDE reports.

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