The U.S. Department of Agriculture (USDA) announced on Tuesday that Argentina’s corn and soybean harvests will be lower than previously expected due to adverse hot and dry weather conditions affecting crop yields.
Key Highlights:
Argentina’s Role in Global Markets:
Argentina is a major grain supplier, being the world’s top exporter of soyoil and meal and the third-largest exporter of corn.
The country competes with the U.S. for global grain and soybean sales, making its production levels critical for international markets.
Production Estimates:
The USDA revised Argentina’s corn production estimate to 50 million metric tons, down from 51 million in January.
Soybean production estimates were also lowered to 49 million metric tons, down from 52 million last month.
Analysts surveyed by Reuters had anticipated slightly different figures, expecting 49.5 million metric tons for corn and 50.49 million metric tons for soybeans.
Market Reactions:
Following the USDA’s updated estimates, corn and soy futures prices fell at the Chicago Board of Trade as traders adjusted their expectations for lower production in Argentina.
Rich Nelson, chief strategist at Allendale, described the USDA’s cut as a “valid, light cut.”
Weather Impact:
Recent rains have benefitted some crops, but not all growing areas received adequate moisture, leading to damage in certain regions.
Farmers reported observing smaller corn cobs and yellowing leaves, indicating stress on the crops when they should be thriving.
Brazil’s Production Estimates:
The USDA also reduced its estimate for Brazil’s corn crop to 126 million metric tons, down from 127 million in January.
U.S. Inventory Estimates:
In contrast, U.S. estimates for corn and soybean inventories remained unchanged from January, which did not provide the expected bullish response from traders.
Craig Turner, a commodity risk management consultant at StoneX, noted that the market did not react positively since U.S. numbers did not decline.