The U.S. isn’t the big dog in the grain market it once was. But playing second fiddle sometimes has its rewards. The rise of corn and soybean production in South America provides new opportunities to sell weather rallies. And instead of Midwest drought fears over the Fourth of July, problems in Brazil and Argentina can emerge almost any time of the year.
Multiple crop threats gave U.S. growers a second kick at the can over the past years. Those who seized the opportunities snared profitable prices, based on events another hemisphere away. The most recent chance came in January. Heavy rains during the end of planting in Argentina helped trigger the rally that took soybean futures to $10.80 after USDA cut its forecast of U.S. production, too.
The flooding revived memories from rains during the Argentine harvest in 2016 that delayed shipments and cut production. Next came searing heat that blistered Brazil’s second crop and cut yields by almost 20%. The events pushed export demand back to the U.S. during the summer and forced Brazil to import feed grains.
Weather in South America has long been a factor for U.S. soybean traders. Production in Brazil and Argentina topped U.S. output for the first time in 2002 and hasn’t looked back since. Brazil became the world’s largest exporter in the wake of the 2012 Midwest drought, a title it’s held ever since.
South American corn
South America’s turn to corn is more recent, and so far less dramatic. Total feed grain production in the two countries is just a third of that in the U.S.
Still, the growth in South America came just as farmers in other countries began ramping up production, too, thanks in part to the run to record prices triggered by the ethanol boom and the 2012 drought. The U.S. exports more feed grains than anyone else. But we control about a third of the trade in these commodities, down half from the two-thirds share we commanded 40 years ago. Brazil’s share today is 15%, up from almost nothing four decades ago. Argentina controls about the same share of the market as it did in 1977. But an end to government export and currency restrictions could free farmers there to plant whatever they like, including more corn.
Weather scares in the U.S. often peak when corn and soybeans are in key reproductive phases — late June to mid-July for corn, August for soybeans. Of course, spring or fall floods and untimely freezes can occur as well.
South America has all these risks, plus a growing region that’s much larger. The distance between the heart of Brazil’s center-west and Argentina’s central states is nearly 1,500 miles, almost three times the trip from Minneapolis to St. Louis. This, plus some production characteristics peculiar to the continent, make
for a growing season that’s year-round in some areas.
Farmers in Brazil’s southern corn belt start as early as August and begin harvesting in January. But most of the crop is planted behind soybeans. The second corn harvest can linger into summer and into the fall in some areas.
By law farmers can’t seed soybeans early to control problems with rust. So most of the crop is planted from October through December, with harvest beginning in January and running into the spring in some areas.
Farmers in Argentina, as in the U.S., plant corn first in September, with beans sown in November and December. Harvest of both crops focuses on April and May.
A spread-out growing region means it’s hard to isolate South America’s influence to a specific time period. And its emergence on the world corn market is still too new to yield trends there. But in soybeans, yields are related to the timing of highs for the crop planted that spring in the U.S. The bigger the South American soybean crop, the later highs tend to come in the U.S. marketing year, typically after the first of the year following harvest. Smaller crops, by comparison, make the U.S. market more vulnerable to weather scares that tend to produce highs during the spring or summer before harvest.
For U.S. growers, watching the weather never stops, even when their fields are bare.
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