With drought conditions predicted in South America during a prime growing season for corn and beans, you may want to take advantage of any dip in prices ahead of the weekend.
As weather gurus predicted in October and November, hot and dry weather has hit South America, specifically Argentina and Brazil.
WHEN IT TURNED
The warnings fell on traders' deaf ears. October and early November were actually wetter than normal during the early planting stages. However, La Niña reared her ugly head in the last week of November. All of Argentina and most of southern Brazil's main soybean growing area are seeing significant dryness that now has turned to hot and dry.
IN THE FORECAST
The current forecast by WXRISK.COM, an industry used agricultural weather site, sees next week as the hottest and driest week yet. Temperatures could exceed 100°, no rain is expected.
The longer-term forecast sees the second week of January equal as dry with potential for the entire month of January running out hotter and drier than normal as La Niña peaks.
The drought is more critical for corn, which is entering its key pollination stage when yields are made or lost. Beans are setting the pods in only a small part of the earliest planted areas. Weather will be critical for beans after Jan. 10.
SUPPLY AND DEMAND-
The fear in the market is that a cut in production would lead to importers turning to the U.S. to overbook grain as a weather hedge.
Currently, Brazil has forward sold 75% of its bean crop, mainly to China. Delivery is in question. China reached an agreement with Argentina last spring to buy more of its corn this year. Currently, U.S. bean and corn exports are running under a year ago due to prior South American commitments to export, but this all could reverse if the drought continues through January.
Buy any dip in prices ahead of the weekend. When we return from the three-day New Year's holiday Tuesday, we will be in the middle of the heat dome with futures pricing in its effect.
March corn could see 6.76 next week. March beans could be at 12.60. While wheat follows up 6.85.