By: Dan Hueber –
It would seem that the South American weather concerns have abated for now, not because the weather has improved in Argentina as that by no means has been the situation, but rather market participants have been further lulled into complacency with the belief that world inventories are such that there is little need for concern. According to the Buenos Aires Grain Exchange, 87.5% of that nations bean acreage are now planted. This would mean that there are approximately 2.25 million hectares left to go, which primarily lay in the northern regions of the nation, which also happens to be the driest. This week Dr. Cordonnier lowered his estimate 2 MMT to 53 MMT. Providing a counterbalance to this has been Brazil. After a delayed start to planting, growing weather has been near ideal for beans and Dr. Cordonnier has raised his estimate for the potential crop there by 1 MMT to 110. Keep in mind that this is still less than last year’s 114 MMT. If these numbers were on the mark, the combined Argentina/Brazilian bean crops would be down 8.9 MMT or about 5%. Do keep in mind though that while all the emphasis to date has been on South American bean production, corn would appear to be the bigger issue. In Argentina where around 78% of the acreage has been planted, the same weather issues that have hampered beans are also adversely impacting corn. Dr. Cordonnier lowered his estimate by 1 MMT to 41 MMT, and with the possibility that the balance of the acreage could be planted into poor conditions, if planted at all, the bias is for lower numbers ahead. While the current weather in Brazil may be good, the late start still has created issues for the safrinha or second crop acreage, which should account for 70% of the total production and is likely to be in jeopardy. Not only is there concerns about late planting for this crop, low domestic prices offer farmers even less incentive to take the “risk” of planting late and hoping for mother nature to provide some type of gift to compensate. Thus far he has left his estimate at 88 MMT but that could go lower yet. If his estimates are correct, we could be looking at a combined crop of 129 MMT, which would be 10.5 MMT or 7 ½% below last year. Currently the USDA has this crop pegged at 137 MMT.
That would seem to be the perfect segue to estimates for this Friday’s reports as they will include updated numbers for South America. The estimates released by Reuters overnight have Argentina corn production at 41.5 MMT and Brazil at 94.13. For beans these two nations come in at 56.33 MMT and 110.27 MMT. For a breakdown of the other numbers we find; US Corn production of 14.579 billion bushels using a yield of 175.4, which is little changed from the previous report. For beans the production estimate is 4.427 billion with a yield of 49.5. Here as well, these figures are little changed from the last USDA estimate. While less attention seems to be paid to this number, December 1st grain stocks are expected to show 12.431 billion corn, 3.181 billion beans and 1.849 billion wheat. Of course, these are key numbers for the ending stocks and the estimates for this stand at 2.431 billion for corn, 472 million in beans and 959 million wheat. Last but not least, the estimate for world ending stock have corn at 203.09 MMT, beans 99.06 MMT and 268.26 MMT. As always, keep in mind it is how we react to the report that counts.
While we will see the export sales report issued on Thursday morning, I would not expect to see any fireworks there, which would suggest that markets will limp into Friday’s numbers. Keep in mind as well that even though we will have an opportunity to trade the report, the grain market will then have a 3-day weekend.
Macros are mixed with energies higher and metal lower but creating headwinds once again is a stronger dollar.