In the wake of Friday’s USDA supply/demand report, which cut the U.S. carryout further as expected, the soybean market is turning its attention to weather in Argentina, where dryness continues to plague many growing regions.
The market remains extremely nervous about potential Argentine crop losses due to strong Chinese demand and the presence of the La Niña weather event in the tropical Pacific, which generally means drier-than-normal weather for Argentina.
Any significant rains across Argentina could deflate weather concerns and cause a significant dip in soybean prices, but there is little moisture in the short-term or intermediate term forecasts.
Dry weather is expected to dominate across Argentina through Friday. Some modest rainfall is likely over the weekend, but dry conditions are expected to return next week.
The January precipitation outlook for Argentina is uncertain as the La Niña weather pattern appears firmly entrenched.
The U.S. National Oceanic and Atmospheric Administration’s Climate Prediction Center expects the La Niña event to peak during November-January, but sees it continuing through the Northern Hemisphere spring 2011(fall in Argentina).
And while most weather models suggest the La Niña should dissipate by the end of spring, some show it sticking around into the Northern Hemisphere summer/Southern Hemisphere winter.
Northeast Argentina did see beneficial rainfall last weekend and soybeans are generally doing well in the country’s northern and western growing areas, but planting has been slowed in southern and eastern areas and recently emerged soybeans are under increasing stress there.
Despite the dryness, planting of Argentina’s soybean crop is still running ahead of last year’s pace according to the country’s agriculture ministry, which reported that 67% of crop had been planted by Dec. 9 compared with 64% a year earlier.
However, planting progress advanced just 7 percentage points from the previous week.
The ministry’s weekly crop report also noted slowing crop development due to a lack of topsoil moisture in key growing areas of Buenos Aires, Argentina’s top soybean producing province.
USDA kept its estimate of Argentina's soybean crop at 52 million metric tons (mmt) in last Friday's monthly supply/demand update and Argentina's agriculture minister has also forecast a 52-mmt crop.
However, other observers have already begun lowering their expectations, with recently released private estimates pegging Argentine production at 49.5-50.5 mmt.
Editor’s note: Richard Brock, Corn & Soybean Digest's marketing editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.