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Ag Markets Continue to Rebound Higher

USDA Ag Attaché report on Argentina; La Niña forecast intensifies

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USDA Ag Attaché Report on Argentina

  • The attaché forecasts corn production in 2020/21 at 47.0 million tonnes, 500,000 lower than USDA’s official projection due to drought damage.
  • Corn consumption is forecast at 14.4 million tonnes, 600,000 tonnes lower than USDA.
  • Early planted corn is in the grain filling stage, and second crop corn, planted in December, is in good condition so far.
  • Based on weather forecasts, the corn will develop in the next few months under dryer than normal conditions due to the La Niña weather effect.
  • Corn exports in 2020/21, are projected at 34.0 million tonnes compared to 35.5 million last year.
  • Argentine wheat exports in 2020/21 are projected at 11.3 million tonnes, 700,000 tons lower than the last USDA report.

FBN’s Take On What It Means: The attaché forecasts are just marginally lower than official USDA projections seen in the last report. The post does point to the continued production risk due to adverse weather conditions and the markets will likely continue to be supported by potential further tightening of supplies.

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La Niña Forecast Intensifies

  • The NOAA forecast model changed its trend of suggesting a weakening La Niña would occur through the summer.
  • The weakening trend was projected to be half of what it was previously.
  • The model now points to significant intensification in La Niña during late April through July.
  • Looking at past similar patterns, there is usually a greater pause in the La Niña event before it intensifies again.
  • A more likely scenario would be for continued weakening into early summer before intensifying again during late summer and more likely in the autumn.
  • Ongoing drought in the western half of North America and its potential to continue through spring is a concern.
  • Dryness could still be an issue in the coming summer, but how significant that may or may not be still remains to be seen.

FBN’s Take On What It Means: If the new forecast is accurate, it could point to a more threatening environment for North America and Russia this summer. However, the relative strength of the La Niña weather pattern is just one of many influences on conditions for the upcoming growing season, and there is plenty of time for the forecast to change. The tightness of US grain balance sheets is likely to keep markets focused on potential production risks.

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