CONAB released its monthly report on Thursday.
Soybean numbers are down again, but, despite potential weather issues, corn crop projections are still strong. Allendale commodity broker Greg McBride provided a breakdown of the report.
?They did lower Brazil?s bean crop again,? McBride said. ?They went from 125.5 mmt to 122.7 mmt. That?s not unexpected. We were thinking that they were going to be lowering a little bit, but nothing compared to the previous month?s drop of 15 mmt. On the corn side of things, a very minor drop. Nothing substantial at all- really only about two thousand tons. They continue to have strong estimates for corn, and that?s what we?ve seen out of the USDA and the Rosario Grain Exchange for Argentina. The corn seems to be holding its own in Argentina and Brazil- better than the beans are at this point. That is a little bit of a different timing for them down there, but the big thing we have to remember is that a bulk of Brazil?s corn is in that safrinha crop, so if they go dry that could be a late-season or early-spring-type move. We?re also already beginning to talk about our own weather here in the U.S., so if we have a short crop and they have a short crop, we could see some more fireworks in the markets.?
McBride added that, from the Russia-Ukraine conflict to weather conditions in the U.S. and South America, there?s still a huge amount of volatility when it comes to predicting harvest numbers for any country this year.
?At this point, there?s nothing that really says we would expect Ukraine to not plant a crop,? McBride said. ?The way we?ve priced it currently is that we expect them to have a lower crop or no crop, but we don?t know. That?s the big kicker at this point. We don?t know how our production is going to be. We were very dry last year basically from Illinois west, and we still had a record crop. We can trade on dryness, and that will put some premium into the market. We can trade on a short crop or no crop out of Ukraine, and that will continue to put premium in this market until we?re told otherwise. That?s when things could get crazy and maybe drop off substantially. That time frame could be May, June, or July. In similar years, like we saw in 2008 in the Great Recession, crude oil was the leader, and something we?ve seen this year. Crude oil runs to $147 or $150 dollars a barrel, and within 6 months it?s $110 off of those highs. Corn and beans followed that- they topped out in July and backed off. That could be what we?re looking at this year. In the 2012 drought, we had higher prices up until late summer where they dropped off like a rock. There are some concerns, and it doesn?t mean that, because prices are going higher, that you can forget that you have a job to do with respect to marketing.?
The team at Allendale can be reached by calling 800-262-7538, or you can visit allendale-inc.com.
