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ANALYSIS: La Nina leaving but gives a departing kick to South America


In the southern hemisphere Australia has had its third-wettest December since records began in 1900, says the country’s Bureau of Meteorology.


The heavy rainfall typically associated with La Nina years has been good to Australian farmers - crop production for the 2020-21 season will be the second-biggest on record at more than 55m tonnes, according to the the local Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES).


But La Nina’s beneficial effects for Australia is proving detrimental an ocean away, in South America.


Argentina drought


La Ninas typically bring drought to parts of South America; this one is no exception.


In Argentina the Rosario Grains Exchange has cut its estimate for soybean production this year to 45m tonnes, 4m tonnes lower than an earlier estimate, giving as the reason persistent high temperatures combined with insufficient rainfall. It’s expected that the actual harvest will be lower still. The exchange estimates that Argentina will lose more than $2bn in export revenue through the lower soybean harvest; Argentina is the world’s biggest exporter of soymeal animal feed.


Thanks to high global prices - soybeans prices are up more than 66% in the past 12 months - it will nevertheless probably gain a record amount - about $35bn - of foreign currency from soybean exports.


Brazil’s slow harvests


Dry conditions in Brazil, Argentina’s northern neighbour, led last year to a slow pace of soybean planting. The concern here is that the slow soybean harvesting could delay planting of the country’s safrinha - the second corn crop, which is now being planted outside the ideal climate window. The safrinha crop accounts for around 80% of the country’s total.


The Brazilian consultancy AgRural last week put the safrinha planting at 54% compared to the previous year’s 80% at the same date.


Brazil’s agriculture minister has said that tight local corn supplies are a "concern" for local meat producers.


All eyes are on China, already Brazil’s biggest soybean buyer and a major corn importer, especially since last year China’s own corn harvest was blitzed by storms. The minister estimated that China will import 25m tonnes of corn this year - compared to 7.6m tonnes in 2019-20 according to the USDA.


US farmers encouraged


High international prices for both soybeans and corn - the latter is up by some 60% in the last 12 months - will encourage US farmers this year; they anticipate strong demand for both items to continue.


Independent estimates put the total US planted area for both crops at a record of more than 184m acres (74.6m hectares), almost 5% higher year-on-year.


This enthusiasm begs the question - what will stop the party? There’s more corn available than previously thought, 288m tonnes in stock at the end of this season according to the March edition of the USDA’s Wasde report; and there will be 84m tonnes of soybeans.


China imported about 100m tonnes of soybeans in 2020 and has been importing record volumes of US corn. This month US corn exporters are on track to beat the record 6.7m tonnes they exported in March 2017.


The slow and disappointing South American harvests have opened export opportunities for US farmers this year - but will appetites, particularly Chinese ones, extend their recent cracking strength? Were bad weather to hit the US Corn Belt this year, prices could soar from their already elevated level.

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