Eyes on South America for Crop Export Outlook

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After a holiday week that left crop markets lower, weather forecasts in South America are likely the biggest driver of prices over the next several weeks.

Jerry Gidel, market analyst with Midland Research, said forecasts are for showers and rain in central and northern Brazil, but conditions are still hot and dry in the northern portion of the country. Conditions are wetter in southern Brazil but likely won’t be conducive to those who need to replant.

“The size of the upcoming 2024 output remains very uncertain,” Gidel said. “The current rainfall has limited the producers’ ability to replant, which could hurt the area’s output.”

Gidel said the delay seen in South America is limiting their ability to produce a crop, which will bleed into the second corn crop. Delayed plantings next year will diminish the final balance sheet totals.

Any reductions would in theory be bullish for crop prices and open up the market for more U.S. exports. China has been making more purchases of future U.S. crop in recent weeks, and while Gidel mentions there is no guarantee all purchases will be shipped, it is a sign the concern is growing in the international community.

“It does suggest some Chinese nervousness about South America’s growing conditions,” Gidel said. “2023 seems to be generally on a good three-year-average pace at this time.”

The other major factor traders are watching pertains to the Argentinian elections and the new president-elect Javier Milei. He ran on a policy of turning the economy around, which includes moving their currency to the U.S. dollar, which is drawing support from the business community. Gidel said this is impacting their ag trade, which is supporting the idea, as Milei is also running on ideas of fewer export taxes.

“This will be a huge process that won’t happen overnight,” Gidel said. “The regular business community and the populists were behind the previous government’s decision to get their tax monies from a source that had to pay before they could export the grain or ag products.”

Source: Iowa Farmer Today