Brazil has gotten off to its slowest soybean planting pace in a decade thanks to exceptionally dry conditions. Especially hard hit with drought-like conditions has been Mato Grosso, the top soybean-producing state in Brazil, which has seen 2 inches of rain in the last 60 days versus normal precipitation of 4 inches. In Mato Grosso, only 8 percent of the crop is currently planted versus the normal of 26 percent for this time of year.
There are three key implications to a delayed start:
Not surprising, there is a clear relationship between planting date and harvest date (see leftmost chart below). For Brazil, Mato Grosso is not only the biggest supplier of soybeans for exports but also tends to be the earliest Brazilian state to get beans ready for export. With Mato Grosso running well behind, it seems likely that Brazil will have a hard time garnering sizable Chinese export business for February and possibly into March. That could possibly help push more Chinese business to U.S. shores and help support March futures, which have traded at a discount in expectation of Brazil’s supply glut.
A more likely impact is the effect that a slow planting has on final soy yields (see middle chart). Here, we see an important correlation whereby slow soy planting seems to be associated with lower soybean yields. Last year’s soy yields for Mato Grosso were recorded higher at around 3.6 MT/hectare, but given where the planting pace is this year, the trend expectation on yields is around 3.1 MT/acre, or 13 percent drag. That would go a long way to reverse the higher acreage expectations for Mato Grosso of a 3 percent gain on the year.
The second-season safrinha corn crop could also face issues as a delayed soy harvest implies a delayed corn crop planting. The impact on safrinha corn yields (see rightmost chart below) is not as clear as it is for soybean yields. For example, in years of very slow soy planting, second-season corn yields have ranged from as high as 6 MT/hectare to as low as 4 MT/hectare, suggesting there is some chance of decent yields. But, having a delayed soy planting likely takes the top end of the corn yield potential off the table.
La Niña weather effects are having important implications already in the early innings of the South American growing season. It seems likely that a delayed soy planting pace could spell production problems, and these effects of lower soy yields and corn yields could be further exacerbated by dry and heat during the growing season. This should be a growing storyline in the coming weeks and months to help corn and soy prices reach new highs.
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