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|Oil World cuts Argentina soy hopes, citing dryness
By Agrimoney.com - Published 22/01/2013
Oil World fed the concerns over the damage caused by hot and dry weather to Argentine crops by cutting its estimate for the country's soybean harvest, amid reviving ideas for prices of the oilseed.
The influential analysis group cut its forecast for the soybean harvest in Argentina, the third-ranked grower and exporter of the oilseed, by 1.0m tonnes to 52.0m tonnes.
The downgrade left the harvest well below the 56.0m-tonne crop Oil World had initially expected, before persistent rains slowed sowings and raised the risk of farmers ditching some seeding plans.
However, Tuesday's revision reflected too little rain, rather than two much, with a dry spell which kicked in last month, leaving some soybean-growing regions with 10-20% of normal rainfall during a key growing period, cutting yield hopes.
Key price determinant
And this downgrade may not be the last, Oil World said, cautioning that "if the dryness continues until early February, soybeans and other summer crops will be stressed and the yield potential reduced".
While the German-based group raised its estimate for the Brazilian soybean crop by 500,000 tonnes to 81.5m tonnes, citing favourable weather, it was the Argentine harvest which was more important in pricing terms.
"The weather conditions in Argentina in coming weeks will determine whether the current risk premium on prices must be raised further or whether we will experience seasonal supply and price pressure with fund liquidation," Oil World said.
'Not much rain expected'
The group's forecast is below a 55m-tonne estimate from the Argentine government, and a US Department of Agriculture number downgraded to 54.0m tonnes two weeks ago, reflecting lower estimates for yield and plantings.
And it comes amid an increased focus on hopes for South American crops, which many buyers are relying on to refill pipelines depleted by drought-hit harvests in South America and the US last year.
Separately on Tuesday, Paul Georgy, president of US broker Allendale, noted that "Argentina received a little less rain than was forecast this weekend", and that "not much rain is expected in the 10-day forecast".
"We will likely begin to see some reduction in production out of Argentina if this weather pattern continues."
Benson Quinn Commodities said that a "drier pattern appears to be in place into early February, raising some concerns for Argentine corn that is pollinating and Brazilian beans that are in the blooming and pod-filling stages".
Prices to surge?
At RJ O'Brien, Richard Feltes termed the weather outlook "positive" to crop prices, "with southern Brazil/ Argentina experiencing net drying over the next two weeks"
"Models vary on how long the Argentine heat will persist, but agree that above-normal temperatures will up the importance of timely, early-February rains."
And Rice Dairy's Jerry Gidel said that "with limited moisture being projected for Argentina and far southern Brazil for the next few weeks by many private forecasters, any extension of high temperatures or dryness into February could surge spot soybeans to the \$15.00-a-bushel area".
Chicago soybean futures for March delivery stood 1.2% higher at \$14.47 a bushel at 09:00 local time (15:00 UK time).
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