Stu Ellis: What Happened in South America Today?

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This seems to be the time of year that Corn Belt farmers are searching for their best pair of grain market binoculars to find out what is happening in South America.

The Brazilian and Argentine farmers are usually generating market-moving activity and this year is certainly not disappointing in that category.

The combination of Argentina’s political hootenanny and the head scratching coming from Brazil’s crop estimates provide plenty for the coffee-shop crowd to talk about. (Although that form of communication has certainly shifted in recent years to social media.)

Nearly every day there are two reports from Brazil that add to the confusion of what is happening in that country’s crop production industry. First, there will be reports of dry soils, pictures of vast soybean fields stunted by a departing La Nina drought, and laments from farmers uncertain whether to replant their soybeans or just move on to their follow-up corn crop. The grain market would seem to think that Brazil is cashing in its remaining chips on soybean production.

But the daily follow-up report from Brazil will typically come from an authoritative source estimating the current soybean crop will be another record production that approaches 6 billion bushels and will be more than enough to supply Chinese needs, along with the rest of the world. That will roil the U.S. soybean market, leaving U.S. farmers to wonder whether they should keep their soybeans in long-term storage, or cash out while they can still get about $13 per bushel.

Farmers are taking a lot of anti-acid pills these days over that decision.

And there is a lot of head-scratching going on also, over what is happening in Argentina, where a new president has been elected, promising to boot out the perennial Peron government policies that have been a foundation for Argentina’s farm economy.

Since Argentina is the global leader in exporting soybean meal and oil, its impact on the U.S. soybean market cannot be understated. For years, Argentine farmers have had to fund the government with a tax on exported agricultural commodities, but the newly elected president, Javier Milei, says that is about to change. And such a proposed change would negatively impact U.S. corn and soybean prices.

Milei was elected on his promises of slashing spending, slashing taxes, adopting the U.S. dollar as the country currency, closing the central bank, slashing regulations, privatizing state industries, reducing federal ministries from 18 to 8, and generally “turning everything upside down.”

But it will take legislative support to do that, and his party only holds seven of the 72 seats in the Argentine Senate and 38 of the 257 seats in the Argentine House.

Whether his political promises are kept is certainly up for debate and will have an impact on the U.S. grain market. Argentina will either remain a minor competitor to U.S. grain exports, or a major competitor for U.S. farmers fighting Brazil for the global soybean and corn export market.

That is why U.S. farmers are locked into any news they can get that has a South American dateline on it.

Source: Herald & Review