Precipitation forecasts in southern Brazil and Argentina remove speculative weather factors in the soybean and corn market

After the release of rather neutral January reports of the USDA - quotes for soybeans and corn began to decline, but in the coming week the pressure on quotes will increase even more against the background of improving weather conditions in South America, which temporarily removes the speculative weather factor.

This week in Argentina and southern Brazil, very hot weather was established with temperatures of 30-35 degrees, which further increases the stress for corn and soybean crops that have only recently been sown.

For the next week in Argentina, temperatures are forecast to decrease and precipitation is expected to arrive for as much as 5-7 days, which will improve growing conditions, but part of the potential of the soybean crop has already been lost, which was noted by USDA experts, lowering forecasts for soybean production by 3 million tons to the level of 46.5 million tons, which corresponds to last year's result. The water level in the Parana River has fallen to a record low near the internal grain port hub of Rosario, which forces cargo ships to load 30% less grain than usual and leads to a decrease in soybean supplies to factories.

In Brazil, arid conditions in the southern states reduce the production potential of first-crop corn and soybeans, and excessive precipitation in the North and center hinders the start of soybean harvesting.

 But finally, precipitation has moved from North to South and rainy weather will be established in southern Brazil in the coming week, which will improve the condition of crops and increase moisture reserves before sowing the second crop of safrinya corn.

USDA experts in their January report more significantly lowered the forecast than analysts of soybean production in Brazil by 5 million tons to 139 million tons (138 million tons in 2020/21 MG), which was lower than the estimates of local analysts, who see production at the level of 140-141 million tons, and also lowered the forecast of corn production by 3 million tons. tons to 115 million tons against 87 million tons last season.

Speeding up soybean harvesting and then sowing second-crop corn with favorable precipitation will put downward pressure on prices.

This week, a powerful storm system passed in the United States, and brought precipitation in the form of rain and snow, but dry conditions in the winter wheat growing zone remain especially against the background of temperatures above normal.

In the areas of the southern plains, the eastern regions will again receive a large portion of precipitation, while in the West the regions suffer from arid conditions, which is unfavorable for winter wheat crops.

The storms brought heavy snowfall to the Midwest and Northern Plains, which is favorable given the arrival of a new wave of arctic air next week.

Agrometeorological conditions in December and in the first decade of January for wintering winter grain crops in the European part of Russia and Ukraine were mostly satisfactory. The weather is much warmer than usual without severe frosts and fairly good precipitation, which replenishes the moisture reserves in the soil.