Prices and Weather in Argentina - Thursday, 19 January 2017

A lot of attention has been focused on the weather in South America where there seems to be a tale of two considerably different stories occurring.  The output for both corn and soybean production in Argentina was recently downgraded by Michael Cordonnier, president of Soybean and Corn Advisor.  His report estimates soybean production will fall by 4 million metric tons to 51 million, corn production will also see a slight decline of 500,000 to 34 million metric tons. He states in his report, “Even if a part of the (soybean) field is not under water, the soil is saturated, which could lead to a lack of oxygen in the root zone causing the plant to eventually die.” He also noted that the corn harvest may be delayed as much of the corn crop in these flooded regions is ready for harvest whenever the conditions are fit.  While regions of southern Cordoba and northern Buenos Aires are dealing with persistent rainfall that is causing flooding the southern portion of Buenos Aires and La Pampa are finding dry conditions and have yet to see rainfall this month.

Remember the saying, “be careful what you wish for”? The current scenario setting up for U.S. producers is a good example. As producers we all want higher prices for our bushels but we need to also consider that if corn were to sustain a rally anytime soon it would likely make our exports unattractive to global customers.  It also would reduce the likelihood of growers shifting more acres to soybeans and away from corn this spring which would only add to our current over-supply situation in corn.  Soybeans had carryout reduced by the USDA in the January report from their initial projections.  While this is positive it doesn’t change the fact that ending stocks are still expected to be 2 times as much as we carried over a year ago.  This will certainly be a limiting factor for further price advancements unless the USDA makes further reductions to the ending soybean stocks.  In addition, U.S. farmers have planted (what is expected to be) the smallest winter wheat crop since 1909. The USDA announced last week that winter wheat acres planted in the U.S. are down 10% from a year ago to 32.4 million acres.  This means that close to 4 million acres are available to plant to other crops this spring.  Last year we saw a similar situation arise when wheat growers reduced acres by 9% from the previous year’s level.  Last year corn was the crop used to replace most of those lost wheat acres, current economics would suggest that soybeans are the more probable choice this year.

The president-elect has given careful consideration and has chosen Sonny Perdue as our new Secretary of Agriculture.  Perdue has a wide variety of experience in the Agriculture Industry:

  • Grew up the son of a farmer and school teacher.
  • Is a licensed veterinarian.
  • Was governor of Georgia from 2002-2011
  • A founding partner of AGrow Star, a grain and fertilizer business. The original company was started by Perdue’s family and later became known as AGrow Star. The AGrow Star Company has since merged with a group of other grain elevators which is now called Milner Grain. 
  • The company handles mostly corn, wheat and soybeans and has over 3 million bushels of storage at their 11 locations.
  • AGrow Star also offers several marketing services for grain producers in that area.

According to Danny Brown, president of AGrow Star, “He (Perdue) knows a lot about the grain business and he knows a lot of people in the industry…He is well versed in fertilizer, chemicals, grain business and marketing.”  If Perdue is confirmed he will head one of the largest departments in the federal government.

Record warmth is arriving today and is expected to last through Saturday with temps from 10 to 30 degrees above average from the Plains to the East Coast. Next week looks to remain near normal until the weekend when cold temps are forecast to return with only light precipitation forecasted for the region.

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