Too much rain, as well as too much dryness, has emerged a threat to South American crops, sparking concerns over the spread of diseases such as white mould and rust on soybeans.

The same weather pattern, blamed on La Nina, which is causing "very serious drought" to develop over Argentina and southern Brazil, is delivering abundant rains over central Brazilian states such as Goias, Mato Grosso and Minas Gerais.

Indeed, further rainfall is expected, with weather models showing "heavy storms" for the belt over the next week, "with large areas [receiving] 4-8 inches of rain, and up to 12 inches over Minas Gerais", David Tolleris at WxRisk.com said.

Farmers in central Brazil fear that these conditions "could increase disease pressure on the soybean crop", influential analyst Michael Cordonnier said.

"The concern is that the lack of sunshine and dryer conditions will promote the growth and spread of fungal diseases."

Crop downgrades 

In Goias, white mould, which sets in during flowering, "has already been identified in the soybean fields", with a handful cases of rust reported too, Dr Cordonnier, at Soybean and Corn Advisor, said.

"If a farmer cannot apply the fungicide at the correct time due to wet conditions, the disease could get out of control resulting in yield losses."

Dr Cordonnier cut by 1.0m tonnes to 74.0m tonnes his forecast for the Brazilian soybean harvest, and by 500,000 tonnes to 53.0m tonnes his estimate of the Argentine crop, although this reflected dryness rather than disease fears.

For corn, he slashed his forecast for the Brazilian crop by 3.0m tonnes to 60.0m tonnes, and for Argentina's by 1.0m tonnes to 27.0m tonnes.

'Very serious drought'

The heavy rains contrast with the conditions further south, including what Mr Tolleris termed "impressive heat and developing very dry conditions over Argentina".

In southern Brazil, the "forecast continues drier than normal in the week ahead", Martell said.

"There may be a chance for rain in Parana on the New Year's weekend, but these are expected to be hit-or-miss showers".

In Argentina, the "weather forecast is dry in the upcoming week, except for showers this weekend in southwest Buenos Aires province and La Pampa.

"Bottom line - South America corn and soybeans are still under threat from too-dry conditions in South Brazil and Argentina".

Price reaction 

The dryness has been reflected in a rebound in Chicago corn prices of nearly 10% in the last two weeks, with the benchmark March contract standing at $6.35 a bushel at 10:00 GMT, up 0.3% on the day.

Soybeans have recovered more than 8% from a 14-month low set on December 14. This factors in a 0.7% dip on Wednesday, to $11.91 a bushel, for the January contract.

Last week, Oil World said that the dry weather would foster a continued revival in soybean prices.

"Soybean prices will soon find a bottom or have already done so," the group said.

"The sufficiently ample world supplies of most oilseeds and products in the October-December quarter are not representative for the full 2011/12 season.

"On the contrary, a global production deficit is looming for oilseeds and products in coming months."