In the midst of global tension and drought in Argentina and Brazil, soybean surpassed US$600 per ton

RIO DE JANEIRO, BRAZIL – The international price of soybeans again showed significant increases in the Chicago reference market, reaching its highest level in more than a week due to persistent concerns about dry weather in the production areas of Brazil and Argentina.

The oilseed contract expiring next March rose US$12.31, and the ton was quoted at US$600.76. Meanwhile, due to withholdings and the exchange rate split, the Argentinean producer receives a price much lower than the one presented today in Chicago.

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On the side of the cereal, corn, whose contract expires in March this year, rose US$8 and traded at US$275.64 per ton. And wheat recorded strong increases in its positions for next March: US$18 arroba and a price per ton at US$310.21.

The specialists’ explanation for these increases is specific fears in the market of a possible interruption of trade in the Black Sea region, as the crisis between Russia and Ukraine deepens.

The international grain market is closely following the conflict. The two countries account for around 29% of global wheat exports, 19% of global corn supply, and 80% of global sunflower oil exports. Traders fear that any military engagement could affect the movement of crops and trigger a massive scramble by importers to replace supplies from the Black Sea region.

In addition, global food prices are already hovering near 10-year highs, driven by strong demand for wheat and dairy products, the UN food agency said late last year. With the increasing use of agricultural products for alternative fuels, the rebound in crude oil prices provides additional support for agricultural markets.

DROUGHT

The price of soybean, the most relevant crop for the Argentine agribusiness due to the income it generates through exports, has been under upward pressure for some time due to the climatic problems affecting Argentina and Brazil, two of the leading world producers, with solid droughts that led different private entities to make cuts in production estimates.

In the soybean lots located in the core zone of Argentina (south of Santa Fe, north of Buenos Aires and center and east of Córdoba), the drought caused significant cuts in yields in soybean fields, and the same could be located below the last drought that was recorded in the 2017/2018 campaign.

This was reflected in the latest report of the Strategic Guide of the Rosario Stock Exchange, which periodically monitors in detail the situation of the agricultural campaign in the productive heart of Argentina.

According to the Rosario Stock Exchange survey, as of February 11 last year, soybean yields in the core region were projected to reach 38.5 quintals per hectare, but the end of that month was dry and recorded a drop of 7.4 quintals per hectare.

Currently, estimates are around 31.8 quintals per hectare. Still, specialists of the entity pointed out that this number was not adjusted in the last seven days, waiting for the rains to stop the decrease, something that has not happened so far, beyond some uneven and less important precipitations than expected in the west and east of the region.