Both corn and soybean futures have remained in weather-market mode to start 2012, but the crop concerns may be getting overblown at this point with much of Brazil still looking at favorable production prospects.

The markets have been focused on hot, dry conditions in Argentina and southern Brazil, which have stressed crops there over the past couple of weeks. The moisture situation is now critical for Argentina’s corn crop and is becoming critical for the soybean crop as well.

December rainfall was less than 50% of normal across most of Argentina’s main crop belt, with the notable exception of the southern half of Buenos Aires state.

The central and northern parts of Argentina’s main crop belt from northern Buenos Aires province through Cordoba and Santa Fe provinces were dry over New Year’s weekend and experienced high temperatures in the 90°s and 100°s F. More of the same weather is on tap for that region through the end of this week, which will bring significant crop stress.

However, weather models now indicate a cool front will move in next week, bringing an increase in rainfall and temporary relief for Argentine crops. Although the moisture is not expected to be enough to end crop worries, it will certainly buy crops some time and one good soaking rain could bring the weather market to an abrupt end.

The influence on Argentina’s weather from the La Niña weather event should peak this month, with the rainfall pattern likely to improve in February.

The situation is certainly more critical for the corn market with early planted corn already pollinating in Argentina, where conditions are worst. With U.S. and world corn stocks remaining historically tight, the market has been counting on a record Argentine crop to meet spring/summer 2012 demand.

It is still early in the Argentine soybean growing season and improved rains during the second half of January could boost the crop going into the key growing period.

Crops have been stressed in southern Brazil as well, but not as badly as temperatures have not been as extreme there as in Argentina. Also, parts of Parana, which is Brazil’s top corn-producing state and No. 2 soybean producer, saw some meaningful moisture over the holiday weekend along with the northern half of Brazil’s southernmost growing state of Rio Grande do Sul.

Crop prospects remain favorable across most of Brazil’s large center-west growing belt, even though rainfall has been running below normal as rains have been timely and temperatures favorable.

Many in the Brazilian soybean trade are still expecting a record crop in 2011-2012. Celeres consultancy has kept its crop estimate at 75.6 million metric tons (mmt), unchanged from December slightly above the Brazilian agriculture ministry’s official 2010-11 crop number of 75.3 mmt.

ABIOVE, the Brazilian vegetable oil industry association, whose members include large international grain firms, on Tuesday pegged Brazilian soybean production at 74.6 mmt, above its estimate of 74.3 mmt for 2010-2011 production.

Editor’s note: Richard Brock, Corn & Soybean Digest's marketing editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.