CHICAGO (Reuters) - Recent dry weather in some of Brazil’s important farming states has raised the idea that the world’s leading exporter of soybeans might develop planting delays.
Given that the soybean planting season just started on Sept. 16, it is far too early to know if that will play out. But if it does, the impacts are not entirely clear. A slow start to the soybean campaign could mean nothing at all. Or, in the worst scenario, it could spell trouble for Brazil’s soybean crop and heavily exported second-crop corn.
As planting starts to ramp up, comparing the pace with year-ago levels could prove misleading, as sufficient moisture in 2016 allowed farmers to plant faster than usual. But the conditions are notably dry, and that should not be ignored.
In the top-producing state of Mato Grosso, which raised 27 percent of the country’s soybeans last year, soil moisture is well below average. The center-west state has been making a slower-than-usual transition out of its dry season, and the soil conditions have further deteriorated in the hot temperatures this month.
The No. 2 soybean state of Paraná is in a similar position. The southern state, which contributes 17 percent of the crop, received sufficient rainfall last month, but conditions have declined rapidly. Some areas have not had measurable rains for a month now and have endured warmer-than-normal temperatures ever since.
However, a good deal of rain is expected next week in both locations. And this comes at the perfect time since Mato Grosso plants about two-thirds of its soybeans in October while Paraná plants just over half in the same month. (reut.rs/2jMyqt4) (reut.rs/2xSapan)
The expected amount of rain will certainly ease fears of dryness for the time being and facilitate a fairly solid start to soybean planting, but it will be too little to rescue these states from the recent moisture deficit they have built.
Historically, a dry start alone seems to have very little impact on soybean yield. Both Mato Grosso and Paraná went on to achieve above-average soybean yields following the driest August-September period of the recent decade (2010 for Mato Grosso, 2012 for Paraná).
But the dryness places more pressure on sufficient rainfall for the next several months. The fact that the east-central Pacific Ocean has quickly flipped toward its cool La Niña phase in recent weeks could prove problematic for southern states such as Paraná, where La Niña in past years has often led to drier growing seasons.
Impacts of early dryness in Brazil can extend beyond the soybean campaign, though, as any associated delays in the crop may carry through to second-crop corn, or safrinha.
Safrinha is planted as soon as soybeans are combined beginning in March and it comprises at least two-thirds of the country’s total corn production. Mato Grosso and Paraná are also the two leaders in safrinha production, growing roughly two-thirds of the second-corn crop.
If the safrinha planting is also pushed back, the crop could be attempting to pollinate and fill closer to the onset of dry season. It is far too early to start making assumptions about safrinha based on recent weather, although some of the tougher years followed a late exit from the dry season.
The duration of the wet season has a much larger bearing on the success of Brazil’s safrinha crop. Despite Mato Grosso’s success with the 2010/11 soybean harvest, the safrinha harvest was extremely disappointing that year as dry season came too quickly.
In early 2016, the faster onset of dry season led to one of the worst safrinha harvests in the country’s history, which supported corn exports from competing countries.
U.S. farmers would not be devastated to hear of troubles for Brazil with soybeans or corn. Brazil and the United States are the top two suppliers of corn and soybeans, and the competition to win international buyers tightens in a well-supplied market.
A recent analyst poll shows that Brazilian farmers are expected to increase soy plantings by 2 percent over last year since the oilseed will offer better returns than corn.
The projected area of 34.7 million planted hectares of soybeans would be a new record for Brazil. The United States planted 36.2 million hectares of soybeans this year, drastically larger than the 33.8 million it planted in 2016, which was record at the time.
However, Brazil’s soybean harvest is expected to be 3 percent smaller in 2018 based on a return to normal yields. The country harvested an all-time high 114 million tonnes earlier this year with the help of exceptional yields.
The latest GFS and EC weather model runs for Mato Grosso and Paraná are available on the Thomson Reuters Agriculture Weather Dashboard:
(The opinions expressed here are those of the author, a market analyst for Reuters.)
Editing by Matthew Lewis