Update for December 23rd, 2021
Another La Niña is causing persistent dryness across portions of Southern Brazil and Argentina have added a considerable amount of weather risk into our current prices here in the U.S. Argentina has less than 70% of the corn crop planted and Brazil’s second season, largest and very important Safrinha crop won’t be planted for several weeks. The newest GFS run shows a low chance of precipitation for these areas as well as Paraguay through at least the first week of January. The impact from this weather pattern is expected to stir up global food markets as the fear of additional food inflation increases.
With another active La Niña weather pattern in control many agencies are assessing crop conditions in SAM and what once looked like a bountiful crop is now under a great deal of stress. The well-respected Dr. Cordonnier from Corn and Soybean Advisor has reduced his previous Brazilian soybean estimate from 144 MMT down to 142 MMT and has lowered his outlook for Argentine soybeans by 1 MMT to 49 MMT. Parana’s agriculture agency, Deral has projected a -12% decrease in soybean production for the state and AgRural which is also based in Parana has lowered their production estimate for the region as well. Keep in mind that the market sensitivity to the existing dry conditions in SAM will likely be equally sensitive to any shifts towards a wetter pattern in these regions as well.
Additional U.S. 2022 acreage estimates are out. And with the rising costs of corn inputs some traders and analysts are predicting more crop acres will move to soybeans but not everyone agrees with that forecast. Chief commodities economist with Stone X Group Arlan Suderman says, “I think I’m going to struggle (to predict U.S. acres) particularly because Brazil looks like they’re going to have a big crop and we have yet to see what Argentina is going to do.” At the present he predicts U.S. farmers will plant 89 million soybean acres, “I think that 89 million is kind of the top right now for soybean acreage, given soybean’s current price relationship with corn.” The private group HIS Markit formerly known as Informa has projected U.S. producers will plant 91.587 million corn acres in 2022. This is an increase from the groups November estimate of 90.787 million corn acres but represents a year-over-year loss of 1.7 million corn acres from this year’s 93.3 million. They also increased their December soybean acres estimate to 88.815 million acres up from 87.935 million a month ago. This projection is an increase of about 1.6 million acres more than the 87.2 million soybean acres planted in 2021.
A news release from Bloomberg reports that the National Corn Growers Association has sent a letter to Mosaic, one of the nation’s leading fertilizer companies. The letter to Mosaic was publicly released this week and addresses what the National Corn Growers Association see as “irresponsible corporate behavior” regarding current pricing.
Dear Mosaic Company, We write to express our concern with your company’s trade practices. As the second-largest phosphate fertilizer producer in the world, Mosaic has almost single-handedly erected an insurmountable tariff barrier to keep its top competitors in Morocco and Russia out of the U.S. phosphate market. Mosaic’s corporate affairs spokesperson recently told Brownfield Ag News that the company is trying to keep prices rational. Saying, “Prices are set essentially by the global supply and demand picture…we don’t dictate prices.” Yet, thanks to Mosaic’s petition, only 15% of phosphorous imports now come into the U.S. without tariffs. And experts say that using Commerce and ITC to manipulate the supply curve does indeed dictate price to farmers. According to farm economist Bob Young’s estimate, “the economic impact of applying countervailing duties of between 30% and 70% on phosphate imports would equate to roughly $480 to $640 million in added fertilizer bills on U.S. farmers.” You’ll agree that Mosaic now has a much healthier balance sheet than it did in 2017-18, when you and J.R. Simplot began pursuing the CVD case. You’ll also concede that you did not anticipate China’s phosphate export ban, the COVID-19 black swan event, rising natural gas prices, a historic supply chain disaster and Hurricane Ida. Mosaic’s posture to date has been a masterpiece of irresponsible corporate social responsibility. But it now has an elegant way to reverse course given these exceptional circumstances. We ask that you voluntarily withdraw your countervailing duties and allow critical supply back into the U.S. at a time of inadequate supplies and soaring phosphate prices. Precedent exists for reaching a voluntary settlement. For instance, in August 2019 the U.S. tomato industry resolved its anti-dumping dispute with Mexico voluntarily rather than escalate tensions and further disadvantage producers on both sides of the border. We look forward to your swift action to withdraw the CVDs. In the meantime, please be advised that we will relentlessly pursue a resolution on this issue.
A green Christmas is in store this year as Christmas Day temps are expected to break records in some parts of the U.S, with forecasts of temperatures reaching +15 to +25 degrees above normal.
By Sunday evening though a fast-moving disturbance moves through the region. The GFS shows colder temps as well which could allow for a rain snow mix that may turn to all snow Sunday night, lately though the GFS has tended to forecast temps lower than what has actually occurred. Looking at the forecast for January several models are showing a high likelihood of colder weather after the New Year. Currently there is a ridge over the eastern U.S. that is holding the cold air to the north in Canada. Some of the weather models show the ridge breaking down in early January which would allow for the cold temps to make their way into the Midwest. But so far every time it looks like the cold air might arrive it gets pushed back by a week or more. Typically, the PNA (Pacific North American Oscillation) weakens after the solstice but right now it is in uncharted territory and any cold temps would not have much lasting power unless the PNA moves closer to a neutral base phase of 0 and the eastern ridge breaks down which would allow the western trough to stream in longer lasting cold air.
In the chart shown above there is “a slow climb towards a far less amplified pattern around January 2nd”and will deliver some sharply colder temps but whether that’s enough to turn the tide long-term remains to be seen. If the past month is any indication of the future there is a strong chance though that the PNA will bounce right back into negative readings and return temps to above normal once again.
Each of us at Ag Performance would like to wish you and your family
A Very Merry Christmas