South American Weather Continues to be the Big Market Mover

Dan Basse of AgResource Company, says, “Global weather is a concern for the markets, and it’s something that could continue to be a catalyst in the weeks ahead. We've got this drought going on in northern Brazil, the Amazon River is at a record low. This would need to go on to continue to impact the markets. We've only got 80% of the soybean crop in the ground as we see it today. So, as we think about the future, it's very key, but the weather in the months of December and January will determine how bad is bad,” Basse says. 

With intel from the AgResource offices in South America, Basse has heard farmers are already being forced to replant crops –sometimes more than once. 

“I have some Brazilian farmers who have replanted first crop corn, and they replanted soybeans maybe three or four times. So, it's a problem we need to watch,” he says. 

If the drought continues to plague the area, Basse says the crop size would need to decline significantly more than forecasts indicate today in order for the grain markets to believe there’s a crop production problem. 

“AgResource started out with a crop forecast in Brazil of 163 million metric tons on beans, and our team being in the fields, say we are down to 156 million metric tons,” Basse says. “We would need to get under 151 or 150 million metric tons if I'm really going to get the bean and meal market going even more. Soybean meal already has a bid today because of last year in Argentina. But it's things that should keep you up at night - weather globally and in Brazil today is not normal.”

Why You Should Care About South America 

Weather, and the effects on the crop, are a growing focus for the market. Brazil has dominated the soybean export market for several years but is now also the largest exporter in the world for corn. 

Why should farmers in the U.S. care about South America? Here are four reasons, says Jon Scheve, President of Grain at Superior Feed Ingredients:

1. Planting and/or harvest happens almost year-roundin South America.
2. Because of South America’s vast crop production geography, it’s easy to misinterpret weather reports.
3. Most of Brazil’s second corn crop is exportedand directly competes with the U.S. crop.
4. While average corn yields are lower in South America versus the U.S., they are steadily increasing.

In South America, soybeans are grown on a long north-south axis, which means they are planted and they mature at very different times. In the U.S., crops are grown more on an east-west axis where planting and maturing dates are more similar throughout the growing region.   

"South America’s soybean planting window lasts nearly four months; in the U.S., it lasts about six weeks," Scheve says. "Because of Brazil’s north-south axis, some fields in the southern part of the country could be planted on the same day fields in the north are harvested."

When it comes to weather, the vast growing region in South America means there are areas experiencing drought while others deal with too much rain.

"Mato Grosso is probably the most important region to watch because it produces nearly 10% of the world’s soybeans, or the equivalent of Illinois and Iowa’s production combined," Scheve explains.

EDITOR’S TAKE:

Agricultural markets have been global in nature for many decades. What happens in other growing regions, be it weather, trade policies or geopolitical forces, can have a huge impact on markets here in the U.S. In the case of South America where they are huge producers of corn and soybeans, it is especially important that our farmers/ranchers pay close attention to their potential crop outputs. It appears that drought is a major concern during this growing season in Brazil and Argentina. Unless they receive some timely rain, it appears prices in the U.S. could benefit significantly.

We are already expecting another strong year for U.S. corn and soy production in 2024, but poor growing conditions in South America could seriously kick markets into high gear. Be sure to keep your truck inventory in front of farmers/ranchers in your area by posting it on AgTruckTrader.com.