RIO DE JANEIRO, BRAZIL – On Monday, December 3, the Office of Agricultural Risk (ORA) warned that the areas under drought conditions for early corn crops have increased in the last week due to the heatwave, with maximum temperatures above 40°, which was not accompanied by rains.
The same is happening in Brazil, where the southern states also suffer from strong water deficit conditions that could impact summer crops.
Both Argentina and Brazil are at the top of the world soybean and corn production, so this weather situation has put the Chicago market on alert.
The spotlight on South America
Karen Braun is one of the columnists of Reuters, an expert in agricultural markets, who closely follows the ups and downs of Chicago.
In the last hours, she revealed the concern about this drought scenario that has been installed in South America (in Paraguay, they have already announced production cuts).
Rain and temperature: what is expected for the January/March quarter?
“Drought in Argentina is one of the main concerns of the market, as the forecast looks dry until the middle of the month, amid the presence of La Niña. The most critical time for it to rain for soybeans is February / March,” he stressed through his Twitter account.
He added: “Argentina is not the only problem: drought has prevailed in southern Brazil, more so in recent months than in Argentina. The forecast for Rio Grande do Sul State is not generous until the middle of the month”.
On this point, Braun recalled that this state was last year the second-largest soybean producer and the first corn producer in Brazil.
More cuts?
Under this scenario, Braun mentioned that Stone X, which specialized in investments, cut its estimate of Brazil’s soybean production drastically: from 145.1 million tons to 134 million tons.
The last official projections were released a month ago: 142.8 million tons by Brazil’s National Supply Commission (CONAB); and 144 million tons by the United States Department of Agriculture (USDA).
The expectation is now set for updating these data next January 11 and 12, respectively. Those reports are usually decisive for commodity price formation.
“I’m not sure the USDA will make such a big cut so soon. We’ll see,” Braun mentioned.