South America Will Continue To Pressure Grain Prices

27.10.2017

More than ever before, producers are living in a global marketplace. That’s never been more evident than this year, after South America came off a record soybean crop, pressuring U.S. prices. Despite planting delays and a drought forecast, South America will continue to cap grain prices.

The primary crop that goes in first is the soybean crop. South America’s planted soybean acres have been exponentially increasing over the past decade. According to Eric Snodgrass, professor of Atmospheric Science at the University of Illinois, the big issue in South America right now is a slight delay in planting.

“They are a little behind last year, but remember last year was a record year,” he explains. “Monti Grasso had some trouble along its northern and eastern region getting the rains they need to germinate the soybeans meant late planting.”

According to Snodgrass, large chunks of the eastern growing region in Brazil had a very dry season which will take the top end off of soybean yield potential in Brazil.

According to USDA, Argentina is expected to increase corn and soybean area and planting there is underway. For both crops, near-trend yields are anticipated. All of South America’s grain farmers have their eyes on the weather as a weak La Nina pattern is developing, Snodgrass says.

“Big La Ninas tend to produce a lot of drought in almost all of the growing regions in South America,” he says admitting that currently we are sitting just below an Enso-neutral forecast. “Don’t forget that even if they take a bit of a hit to their yields, [South America] will still have one of their largest crops on record because they are planting more soybeans, roughly 6,000 new hectors of land every year.”

Policy changes regarding export taxes on soybeans could help Argentinian farmers.  With large corn crops, USDA anticipates both Brazil and Argentina to boost their exports to records for 2017/18 (Oct-Sep).  Increasing competition is expected to result in a declining U.S. share of global corn trade, the agency says.   


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