Corn and soybean prices declined sharply in mid-November and remained at the lower level through mid-December. From mid-December through early January, the cash price of corn in central Illinois increased by 78¢ while the cash price of soybeans increased by $1.21/bu., says University of Illinois Agricultural Economist Darrel Good.

“One factor that has contributed to higher prices is adverse weather in parts of Argentina and southern Brazil during a critical phase of crop development. Periods of extremely high temperatures and well below average levels of precipitation in December have threatened both the corn and soybean crops in those areas,” Good says.

The adverse weather followed very favorable weather conditions in November. The weather pattern in those areas has been similar to that of 2008-2009 when corn and soybean production was substantially reduced in Argentina, he says.

“Some beneficial rainfall in the dry areas is expected this week, but the forecast calls for a return of hot, dry weather next week. It is difficult to assess potential corn and soybean production in Argentina and Brazil, but the pattern of production estimates in 2008-2009 might provide some guidance,” he notes.

In early December 2008, the USDA judged 2009 corn production potential in Argentina at 710 million bushels. The final production estimate was nearly 17% smaller at about 590 million bushels, he says.

The 2009 Brazilian corn crop was forecast at 2.1 billion bushels in December 2008, but actual production was nearly 5% less at 2 billion bushels. In early December 2011, the USDA forecasted the 2012 Argentine corn crop at about 1.14 billion bushels, Good says.

If production is eventually reduced by 17%, as it was in 2009, the crop would come in at about 950 million bushels. Similarly, the USDA has projected the 2012 Brazilian corn crop at about 2.4 billion bushels. If production is reduced by 5%, the crop would total about 2.3 billion bushels, he says.

“A 2012 South American corn crop that is 290 million bushels smaller than the current forecast would likely lead to larger U.S. corn exports in both the 2011-2012 and 2012-2013 marketing years,” Good says.

In December 2008, the USDA projected 2008-2009 marketing year U.S. corn exports at 1.8 billion bushels. Exports were 49 million bushels larger than the forecast, equal to about 22% of the reduction in the size of the South American crop from the December 2008 forecast, he says.

“This year, USDA projects U.S. corn exports at 1.6 billion bushels. A 290-million-bushel reduction in the size of the South American crop could boost U.S. exports by as much as 65 million bushels. The increase, however, might be smaller due to the abundance of feed grains and wheat in the rest of the world,” Good says.