Next week critical for South American soy and corn

Weather in the coming days will be crucial for Brazil and Argentina's corn and soybean harvests, especially for the countries' earlier-planted crops already hit by drought, while any future rainfall could still boost late crops.

Hot and dry conditions in southern Brazil and Argentina are forecast to continue for the rest of the week, with rain expected on 17 December. The countries' soy and corn crop conditions, yields and production this marketing year have seen estimated reductions by Brazil's Conab, and Argentina's Buenos Aires Grains Exchange (Bage) and Rosario board of trade. The rain forecast for next week may not be enough to mitigate drought damage to Argentina and Brazil's early corn and soybean harvests, especially considering previous forecasts of rain that later changed to reflect continuing drought.

Brazil

Brazil's southern region of Parana -the country's largest soybean producer - is among the most impacted areas, with precipitation levels in January 2022 below the decade average but still within the bounds of the 20-year range.

Conab reduced its projection of Brazil's soybean production this marketing year down to 140.5mn t from 142.8mn t in December. And the US Department of Agriculture's (USDA) World Agricultural Supply and Demand Estimates (Wasde) January report has reduced its estimation of Brazil's soybean production in 2021-22 to 139mn t, from December's projection of 144mn t. But many farmers and private analysts have said they believe the estimate should have been reduced further, with alternative projections ranging from 135mn t to as low as 131mn t.

That said, the USDA left its projections of Brazil's 2021-22 soybean exports unchanged at 94mn t largely on reduced projections of ending stocks, down by 4.7mn t to 23.55mn t.

And the soybean harvest in the region of Rio Grande do Sul - Brazil's second-largest producing region - will take place in April, and the crop could recover, provided regular rainfall in the coming months.

On the corn side, the drought has primarily threatened Brazil's first-crop corn, with the country's second-crop corn - which farmers are planting now - less likely to be negatively affected by the drought. And Brazil's second-crop corn considerably exceeds first-crop, with Conab estimating production for second-crop corn at 86.3mn t and for first-crop at 24.8mn t.

In addition, Brazil tends to source corn exports from its second-crop corn, leaving first-crop corn mainly for domestic consumption. The USDA left its projection for Brazil's corn exports in 2021-22 unchanged at 43mn t, but reduced the country's estimated production down by 3mn t, now pegging it at 115mn t, on changed imports and ending stock projections - the former up by 300,000t, and the latter down by 2.7mn t.

Argentina

In the regions of Cordoba, Santa Fe and Buenos Aires - where 69pc of Argentinian corn is produced - maximum temperatures have risen far above decade averages and even 20-year ranges, surpassing 45°C on 10 December.

Argentina's Rosario board of trade expects a substantial loss in yields of this season's first-crop corn, regardless of potential rain next week, but it could prevent further reductions. In its latest report, Bage reduced the amount of corn rated good-to-excellent to 40pc, compared with the 58pc estimated a week prior. That said, the USDA left its projections of Argentina's corn exports in 2021-22 unchanged at 39mn t but reduced the country's production down by 500,000t to 54mn t on decreased projections of domestic feed consumption.

This season's second corn planting campaign - currently under way - has been experiencing delays because of insufficient surface soil moisture, with the region of Santa Fe most affected. If soil moisture levels do not improve in the coming days, the Argentinian corn harvest later in the year could see significant delays and downgrades in quality.

Drought is also delaying Argentina's soybean planting campaign, with rain required until the end of this week to hydrate topsoil to keep to the already-extended planting schedule in the south of Buenos Aires and La Pampa, according to Bage. In the northwestern regions, soybean planting is behind last season's progress by as much as 27.6pc.

If the drought continues, Argentina may cut its soybean planting short, leaving the area intended for soybean planting for other crops. Adding to reduced soybean acreages, expectations for crop yields will also decrease.

By Anna Sneidermane