Market analyst: South American crops struggle

Ray Grabanski
Special to the Farm Forum

We begin the month of December with significant problems in South America, where dry weather has resulted in a delayed start to planting and now is affecting the growing season, as well.

One private scout has started to reduce the South American crop forecast by one to two million metric tons for both Argentina and Brazil in both corn and soybeans.

Whether or not that will eventually serve to be justified will depend on the weather over the next two months. December and January are the two rainiest months for South America.

South America’s weather is still not good, with above normal temperatures and below normal precipitation still forecast for the next week in this tropical environment and at its peak of yearly rainfall in December and January. The 8-14 day forecast tries to push back toward normal, with still signs, though, of below normal precipitation and above normal tempatures. So, South America’s weather is still less than ideal.

We have a troubling technical formation in corn, with a downside reversal on Nov. 30 as we started the evening higher, and dropped into negative territory during the day.

Soybeans and wheat also have threatening chart formations, but corn is the most formidable. We might see speculators take a shot at the short side of corn now, and unfortunately, that has worked recently in wheat as we’ve trended lower the past few weeks. So, perhaps the uptrends could be in jeopardy.

The problems with wheat began with improving weather, as it has started to rain in winter wheat country the past few weeks. Yesterday’s weekly ratings improved 3% in winter wheat to 46% rated good/excellent, a hefty improvement from last week. Rains the past week continued to shrink the drought nationwide as soil moisture levels also rose. That is good news for U.S. growers, but it also is weakening the U.S. grain markets.

Export sales and shipments out of the U.S. continue to impress, while very strong sales and shipments of nearly all grains continues. It’s likely that the United States Department of Agriculture (USDA) will need to hike export projections for soybeans and corn, and perhaps even wheat in the December report. Certainly, we are on a pace that requires higher projected exports.