Ongoing dryness in major soybean growing regions of Brazil have been a feature in global oilseed markets in recent months as traders continue to mull the effects of drying conditions. Dryness in northeast Brazil and a wetter pattern in Argentina, both of which have persisted in recent months, are consistent with El Niño weather patterns. Many private crop watchers have been busy lowering their latest projections for the upcoming Brazilian soybean harvest as the market attempts to quantify the potential yield losses. The U.S. Department of Agriculture (USDA) last projected the 2018/19 Brazilian soybean crop at 122 million metric tons (MMT) in December, noting expectations for better yield potential in the key Center-West region. Since that time, however, that region has experienced a below-normal rainfall pattern, highlighted by the darker regions in the 30-day precipitation anomaly chart below. The maps below reflect 30-day precipitation anomalies from late December and early January and show that dryness has intensified over the period in the Center-west while expanded into the northeast Brazil. It’s also evident that a wetter pattern is developing in northeastern Argentina.
This developing pattern has spurred many private crop watchers to write down their expectations for Brazilian soybean output. News services compiled analyst estimates in the first week of January that pegged the Brazilian soy crop between 116 MMT and 122.2 MMT, while the range of guesses for the Argentine soybean crop was narrow at 54 MMT to 56 MMT. There has been less chatter in the market surrounding Argentina’s crop potential as their harvest comes after Brazil’s, giving the crop a later window of influence and given expectations for a sizeable rebound from last year’s poor crop.
While the market’s focus is on South America for now, the National Weather Services’ Climate Prediction Center (CPC) issued a 65 percent chance of a mild El Niño pattern developing in North America this spring in its latest monthly report. This was up 5 percent from last month, and serves as a reminder to the market of the constant risk that weather plays in world crop production.
