As I write this column on Jan. 25, the world still doesn’t know if Argentina will get the precipitation it needs for average corn and soybean crop yields or if it will continue to be dry, and the country headed for below-average crop yields. I’ll come back to that in a moment.
Let’s take a second to appreciate the direction of most markets at this time. In your wildest dreams, did you think in January 2020 that a year later you’d be seeing canola at $15 per bushel? A soybean-led oilseed price rally? Wheat prices at the higher end of the past decade, with possibly more demand because of Russia’s proposed export restrictions coming into play mid-February?
For farmers with unpriced canola in the bins, this is a windfall. However, it’s no reason to throw incremental marketing plans out the window. In most years, having unpriced canola in the bin is risky. Far more important than hitting the jackpot in an unusual market like this one is having a marketing plan that locks in a profit on every sale. Whether you’re selling last year’s inventory into this market or hoping to ride its coattails into new crop pricing, these markets are something to feel grateful for during this long COVID winter.
In my last column, I shared some information provided by Bruce Burnett — MarketsFarm’s director of weather and markets information — during a webinar called Markets Outlook Summit: 2021 Overview. This first of a four-part series was presented by MarketsFarm, which I had the good fortune to host on January 14.
In my column, I looked at Burnett’s weather outlook for Western Canada, the atypical La Niña winter we’ve been experiencing, precipitation during last year’s growing season and this winter so far, and the weather forecast for planting this spring.
Although our weather conditions (up until this week) have been the opposite of what we’d normally expect for a La Niña winter — which should’ve produced colder and snowier weather across Western Canada — in South America, the La Niña event has produced the conditions we would expect: above-normal temperatures and below-normal precipitation.
Which brings me back to our weather watch on Argentina. Overall, South America is experiencing the brunt of the conditions brought on by La Niña, especially Brazil and Argentina, said Burnett.
Up until mid-January, both South American countries experienced above-normal temperatures and below-normal precipitation.
Burnett on Brazil
Brazil saw significantly below-normal precipitation amounts throughout most of the northern growing areas and mixed conditions in the southern growing regions. However, the southernmost state — Rio Grande do Sul — was one of the driest areas in Brazil in December. Brazil is “not flush with soil moisture,” said Burnett.
And although Brazil is getting some reasonable rains, crop precipitation requirements are very high at this time of year.
Argentina, significant dry conditions
Argentina has had “significant” dry conditions this growing season so far. The country did receive more rainfall in December than Brazil; however, the key growing areas received less than 50 per cent of normal precipitation. Although the dry conditions have occurred at the beginning of the growing season, it’s going to be very difficult for corn and soybeans to recover from this early-season drought, said Burnett.
“That’s probably the area that is going to suffer the most in terms of yield prospects,” he said.
Precipitation over the next couple of weeks in those key growing areas of Argentina could stabilize the crop. If not, there will be lower production estimates for corn and soybeans. The importance? These crops are essentially going to drive the global price outlook, said Burnett.
“Even though we don’t produce a lot of corn and soybeans in Western Canada, it’s going to have a big impact on our grains and oilseed markets — canola, wheat, barley, any feed grains — it’s going to have a big impact in the next few months on prices.”
Which is why, for the next couple of weeks, the world will be keeping a close eye on Argentina’s weather.
Already, the USDA has lowered the Argentinean corn crop by 1.5 million tonnes and has also lowered the soybean crop estimates in Argentina in its World Production, Markets and Trade Reports on Jan. 12. Burnett said he thinks both Brazil and Argentina are headed for a below-average crop in terms of soybean and corn yields. The next few weeks will tell.
In my next column, I’ll provide highlights of Burnett’s market outlooks for wheat and durum.