Rains threaten South American wheat

There are signs that South America’s grain crops could be disappointing in 2022-23, says an analyst.

Excessive rainfall is threatening the wheat crop in Parana in southern Brazil, said Michael Cordonnier, analyst with the Soybean & Corn Advisor newsletter.

Parana is the second biggest wheat producing state in the country.

Parts of the state have received as much as 275 millimetres of rain in October and there is more in the forecast.

The wheat harvest is about half complete in the state and the crop remaining in the field is deteriorating.

“That’s the biggest fear farmers in Brazil have, is if it rains at the wheat harvest,” he said.

“The wheat they just recently harvested was poor quality, and the wheat still out in the field is probably worse quality.”

However, acres were up about 15 percent in the top wheat producing state of Rio Grande do Sul and the crop looks good there.

Overall, Brazil will likely produce more wheat than last year, although a higher percentage will be feed quality due to the problems in Parana.

Brazil never produces enough wheat to meet its own domestic needs. It has to rely on exports from Argentina.

But Argentina’s crop is also struggling. The Buenos Aires Grain Exchange and Rosario Grain Exchange are both forecasting a crop of about 15 million tonnes, down two to three million tonnes from their earlier estimates.

La Nina is supposed to result in dry weather for southern Brazil and Argentina. While conditions have been the exact opposite in southern Brazil, they have been unfolding by the playbook in Argentina.

“It’s going to be a very disappointing wheat crop in Argentina,” said Cordonnier.

The dry conditions are also affecting the country’s corn crop. Planting was 16.4 percent complete as of Oct. 13, compared to the five-year average of 30 percent.

“They are way behind,” he said.

Much of the corn planting may be pushed back to the second phase of planting in December or growers may decide to grow soybeans instead.

The Rosario Grain Exchange has dropped plantings to one million acres below last year’s levels and Cordonnier believes the country’s early-planted corn will be disappointing.

Argentina exported 37.5 million tonnes of corn in 2021-22, accounting for 18.5 percent of global trade of the commodity. The USDA expects exports to rise to 41 million tonnes this year.

AHDB Cereals & Oilseeds Market Intelligence said there is a 75 percent chance that La Nina will linger for the December 2022 through February 2023 period.

It noted that the country’s corn yields have plummeted during similar La Nina years, falling by 21 percent in 2011-12 and 25 percent in 2017-18.

However, there have been La Nina years where yields were not affected at all, such as 2016-17 and 2020-21.

“With global corn supplies already dampened due to the war in Ukraine and adverse weather in the U.S. and EU, we could see markets further supported in the second half of this season from this La Nina event,” AHDB analyst Tom Price said in a recent Grain Market Daily commentary.

Argentina’s soybean crop has not yet been planted. Even if that crop struggles it will likely be offset by what is expected to be a monster Brazilian soybean crop.

“But for corn it’s a different story,” said Cordonnier.

“The corn crop in Brazil would have a hard time making up for a deficit in corn production in Argentina.”

Three-quarters of Brazil’s corn is grown in the safrinha season or second crop after the country’s soybeans are harvested.

But the soybean crop is late this year, which will delay corn planting, and that typically results in lower yields.

Cordonnier initially believed that South America’s corn harvest would top last year’s output by six million tonnes. Now he’s wondering if it could be lower than last year.

“Corn stocks are tight, and everybody is keeping their fingers crossed that South America will (have) a very large crop,” he said.

“I don’t know.”

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