Good harvest expected in South America

by Drew Lerner
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South America
La Niña likely won’t be enough to significantly reduce output in Brazil and other key production areas.
 
In a commodity futures world designed to find or make a buck as quickly as possible, we continue to hear chatter about La Niña and potential problems it might bestow upon South America this summer. However, La Niña is really not the dominating weather event of the day and it is going to be difficult to create a serious problem in Brazil production this summer, despite a few areas of dryness and some excessive moisture.

 

The look ahead is always unclear and everyone looking to make money will do so on the slightest whim of potential weather trouble. Similar to the talk of trouble in the United States last summer, the marketplace is still trying to find fault with the coming South America summer season. However, extreme caution will be needed if playing off of that whim because the odds are relatively high that production will be good from Brazil and Argentina this summer.

Weather fundamentals are only reinforcing this period of mediocrity in market trade. The current corrective period of futures prices may not break much over the Southern Hemisphere summer if World Weather, Inc. is reading its proverbial tea leaves correctly. Weather patterns do not look threatening. Sure, La Niña-like conditions are prevailing and there will be a summer filled with that, but it just might not be enough to thwart the good production potential very far.

La Niña-like conditions do have some potential to strengthen over the next few weeks. However, a big part of the La Niña effect on Brazil, Paraguay, Uruguay and eastern Argentina is dependent on spring dryness. Traditional La Niña events delay seasonal rainfall in eastern Argentina, Uruguay, Paraguay and southern Brazil, and quite often the rain that does occur is lighter than usual. That drier tendency usually leaves a little moisture deficit lingering in the soil when the heart of summer comes along. Frequently, that moisture deficit may be perpetuated and even expanded upon during the heart of a La Niña summer when rainfall is frequently abundant to excessive from center west to center south production areas.

This year’s minimal influence of La Niña on South America spring weather will not likely leave a moisture deficit in the soil to become problematic later in the summer. That does not mean a little dryness cannot or will not evolve during January and February, but the odds of it festering into a full blown drought-like problem is very low.

World Weather, Inc. does believe that some heavy rain will fall during the planting of safrinha (second season) corn this year in January and February. Some rain delay in the harvest of early soybeans and planting of second season corn could raise a little market concern, but it likely will pass in sufficient time to minimize the impact. Nevertheless, a period of concern is expected and there may be a little dryness in eastern Argentina, southern Brazil, Paraguay and Uruguay during that same period of time. Without having dryness as an issue this spring, the short term bout of dry weather expected this summer may not have nearly the impact that it would otherwise have, and that is why World Weather, Inc. is not looking for a serious impact from adverse weather.

Today’s soil moisture in Brazil is already in better shape than usual for some areas. Sufficient rain has occurred recently to support planting, emergence and establishment of many summer crops. Mato Grosso reported its soybean planting was advancing at a record pace and that may help get some of that early crop mature and harvested before the truly wettest conditions arrive in January and February.

Dryness is still a problem in Bahia, northern and eastern Minas Gerais, Espirito Santo and a few areas to the north into a part of Tocantins and easternmost Mato Grosso. A multi-year drought in northeastern Brazil is expected to be notably eased this summer. Dryness has left water supply critically low in parts of Bahia, northern Minas Gerais and many other areas surrounding the region reported deplorable production last summer because of hot and dry weather. That pattern will not be repeated even though soil moisture is still critically low.

Seasonal rainfall in northeastern Brazil does not usually begin until November. Dryness in late October was not much of an immediate concern and it will disappear by mid-summer – at least from a topsoil moisture perspective. It will take much longer to restore the water supply after so many drought-stricken years.

Recent rainfall surpluses in far southern Brazil, Paraguay and portions of Argentina have soil and crop conditions mostly in good shape. However, too much rain fell in Rio Grande do Sul during the week ended Oct. 21, with amounts varying from 6 to more than 10 inches. Flooding resulted and damage came to its wheat crop where harvesting was only 15% complete at the time. Rio Grande do Sul produces 36% of the nation’s wheat crop and the state was still too wet as the last week of October began.

South America
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Favorable outlook in Argentina

Argentina, like southern Brazil, was reporting abundant rain in October with most of the nation going from a little too dry at the beginning of the month to a little too wet in the last week. The big change has quite a few producers complaining suddenly that it is now too wet for fieldwork and a drier bias is needed. Rainfall was mostly above average in San Luis, La Pampa, western Buenos Aires and in some far northern Argentina locations. However, soybean planting mostly occurs in November into January, making the present wet bias of little concern for that crop. Corn and sunseed planting had been advancing relatively well before the rain came, but it looks likely that drier weather in early November will prove to be nearly as well timed to bring an aggressive planting pace to much of the nation.

Some recent concerns over winter wheat conditions in Argentina should be put to rest with the drier early November weather that is expected.

Argentina’s topsoil was saturated in much of the nation when the last week of October began and some new concern over winter wheat conditions in that country began in response to the wet bias. But the same drying to benefit summer crop planting in November also is expected to bring improvement to wheat and it should occur in time to stave off a bigger problem in grain quality and production.

The summer outlook of wetter biased conditions in center west, northern parts of center south and some northeastern crop areas of Brazil will be accompanied by some cooler biased temperatures. The only warmer-than-usual conditions may be in southeastern Argentina, Uruguay and a few Rio Grande do Sul locations in the heart of summer.

South America’s outlook this summer is mostly favorable. However, the brief period in January and February when heavy rain falls in parts of northern Brazil crop areas and a little dryness evolves in southeastern Argentina, Uruguay, Paraguay and southern Brazil will begin a short-term period of crop concern. World Weather, Inc. believes the weather anomaly will pass with some concern, but the bottom line will likely include another favorable production year for nearly all of South America.

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