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South American Weather, Latest on Chinese Buying and U.S Drought and Winter Outlooks

Update for November 27th, 2020

South American weather has been in the forefront for several weeks now as the La Nina weather pattern has set up and continues to build strength threatening yield outlooks. World Weather Inc. stated, ‘Something is Wrong in Brazil’s Weather Machine.” “Center-west Brazil into San Paulo and Parana are amid a 10-day drying trend that will linger into next week. Concern over long-term soybean and corn prospects will increase as the ground firms.” World Weather expects rains will return to those driest areas during the first week of December but, “it may be too light and spotty to support ideal long-term conditions” particularly for crops like corn, soybeans and cotton. World Weather reports that moisture is variable and recent spotty rainfall has produced several areas of concern. (Maps below illustrate the percentage of normal rainfall observed by state)

Brazil is not alone; southern Paraguay and Argentina are dealing with similar conditions.

Forecasts show increased chances for rainfall in southern regions going into next week and going forward frequent rainfall will continue to be key to ease worries about possible yield reductions. “The moisture coming will put an end to the declining conditions and some crop improvement is possible, but a full restoration in production potential is not very likely. There is reason to believe that more stress may evolve later.”

“In 41 years of monitoring and predicting monsoonal rainfall in Brazil there has never been a year like this one in which monsoonal rains were so poorly performing in both October and November” says World Weather. They also caution that talk of the development of an unprecedented drought is too early. WW does not believe that the potential for good yields is over except for portions of western and southern Rio Grande do Sul and bordering areas of southern Paraguay.

South American Crop Consultant Dr. Michael Cordonnier has not made changes to his Brazilian soybean production estimate of 132 MMT but his bias going forward continues to be neutral to lower. He has stated concerns regarding the slow, dry start to the growing season but adds, “Soybeans have a remarkable ability to withstand adverse conditions early in the season only to end up with normal yields if the weather cooperates during the critical reproductive period.” Other crop analysts have estimated the upper end yield potential of the Brazilian soybean crop near 134 MMT while the lower estimates range from 125-130 MMT. Brazil’s soybean production record was set last season when farmers harvested 126 MMT.

Dr. Cordonnier has not adjusted his Brazilian corn production estimate of 106 MMT and his outlook is neutral to lower going forward. He explained his neutral to lower bias is due to the current damage to the countries full season corn crop and the uncertainty facing the remainder of this seasons growing conditions. Cordonnier also expects that these same issues will likely continue and compromise the 2nd season Safrinha corn crop as well. His estimates for Argentine corn and soybeans were lowered and his bias going forward is neutral to lower for both crops.

This week there has been a lot of different stories regarding the Chinese soybean orders. Reuters ran a story earlier this week that suggested some of the importers and processors in China were considering the cancellation of several U.S. cargoes that were scheduled for shipment in December and January. A trader for one of China’s leading soybean processors explained that crush margins have fallen due to the high prices, “Small private soybean importers are trying to wash out December and January U.S. soybean shipments as crush margins have turned negative. This is for those importers who bought cargoes but did not set the price in the futures market.” Prices for new crop Brazilian soybeans are running at a considerable discount to U.S. soybeans which also makes the prospect of cancellations more realistic.

Bloomberg reports that China is planning to import more U.S. corn. State-owned Cofco Corp has sold 10 million tons of corn to domestic users and will likely need to increase purchases from the U.S. even further to meet needs. If additional sales are realized total Chinese corn imports of U.S. corn will be on track to hit 30 million tons next year.

Increasing levels of drought conditions across large portions of the U.S impacted crop yields during the 2020 season and the situation is worsening. According to the most recent U.S. Drought Monitor, 40% of the U.S. is experiencing moderate to exceptional drought levels and extreme to exceptional drought can be found covering nearly 16% of the country. Close attention should be given to U.S. key corn producing states across the Midwest. Very dry conditions are present across a large portion of the top corn producing of Iowa as well as Minnesota, Missouri, Illinois and Indiana and most of the western U.S.

The past several years we have gotten well acquainted with the term Polar Vortex and what that means for our winter temperature outlook. This Winter season a very strong and symmetrical Polar Vortex is in place which means that most of the extremely cold Arctic air will stay trapped in the Arctic much of the season. (An illustration of the Polar Vortex is shown below) Cold air can escape and affect the middle latitudes when the boundaries of the vortex break apart for a period of time. Since the Polar Vortex is very strong this season, less intrusions of Arctic air are expected this winter and any that may occur are not expected to be prolonged.

Looking at the forecast for the upcoming week most of the country including the Midwest should expect slightly warmer and drier conditions than normal.

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