For Agrositio. 19/07/2021 | 12:07
Grain price formation is already immersed in what we commonly refer to as the US weather market, considering the period in which crops are defining their yield. It refers to the weeks with the highest water consumption for adequate growth and the meteorological variables acquire greater prominence. Forecasts, accumulated, temperatures, moisture reserves, added to the phenological evolution of crops, become central elements in agricultural markets.
Volatility was exacerbated in the last four weeks, in the face of changes that have been manifesting, adjusting the expectations of supply and demand, mainly in the US In the last days of June and the first fortnight of this month, rainfall records have It has been more generous in the southeastern central strip of the Midwest, more precisely on Missouri, Illinois, Indiana, Ohio and Kentucky, allowing adequate vegetative development, both for soybeans and corn.
However, as we move further westward in agriculture, further into the plains, the rains have become rarer and more erratic. The agronomic panorama was getting worse for the spring wheat squares, the most affected by its location. In fact, the US Meteorological Service estimates that 98% of the lots suffer from some degree of drought, in contrast to corn and soybeans, which indicate 36% and 31% respectively. In these last two, they showed a decrease of 2 points with respect to the previous measurement.
In these circumstances, the prices traded in CME are recomposed against the forecasts of a warmer and drier climate, installed for the last two weeks of July. Soybeans returned to above 535 US $ / ton, levels that had not appreciated in just over a month. However, part of the increases responded to the recovery of vegetable oils (soybean derivative exceeds 1,500 US $ / ton) and rapeseed cultivation appears on the scene in Canada, the main input for the production of oils in that country. , which is suffering from certain complications.
In addition, we must not omit the interaction of agents outside the agro-industrial chain, especially in the CME operation. The acceleration of US inflation and the mere idea that the Federal Reserve (FED) sustains its expansionary monetary policy, diverts a flow of money towards the commodities segment. The CPI rose 0.9% during June and raised the interannual variation to 5.4%, exceeding the 4.9% anticipated by private companies. The monetary authority indicates that the rise in the CPI is seasonal in nature and will not deactivate the stimulus plans, continuing with its bond purchase program to ensure liquidity to the North American economy.
If we focus on the corn market, the South American 2020/21 harvest becomes fluid, relative to late and second-rate plantings. The results that the Brazilian safrinha is showing confirm the deterioration suffered in the critical stages, to which are added the effects of the polar wave on crops that were still pollinating. Mato Grosso is the state with the greatest progress and is the least affected by climatic adversities. On the other hand, Mato Grosso do Sul and particularly Paran, are corroborating losses of up to 60% in certain areas. Private calculations indicate that the safrinha will not reach 60 million tonnes. nationwide compared to 75 million tn. obtained the preceding cycle.
The shortage of grain available in the neighboring country and the need for consumption generates a higher bid with exporters, boosting premiums for immediate deliveries and short terms. As an example, for shipments in August, a plus of US $ 14 / ton is traded over the September position in CME, compared to the US $ 6 / ton traded a week ago. Even poultry and pork producers were agreeing on a series of imports from Argentine origins. Based on the latest shipment schedule, about 12,000 tons. They will be dispatched from Punta Alvear to Brazil.
The productive panorama looks more attractive in our country, with a harvest that is gaining momentum and with satisfactory yields in Cordoba, the northern provinces and certain sectors of Buenos Aires and La Pampa. The shift in the crop cycle derived from the delay in sowing work at the end of the year is also evident. In June, the harvesting machines raised about 7.90 mt. against 11.50 mt. obtained in the same month of 2020. The dynamics changes from this month that, during the first fortnight, 4.90 million.tn were collected. exceeding 3.50 million tn. recorded last year.
Considering the pending hectares, we calculate a volume to be threshed from now on of between 17 20 mtn. tripling the record of the previous campaign, from mid-July onwards. This inevitably affects the logistical distribution of this harvest, which is also interceded in the Up-River terminals by the extreme downspout of the Paran River. Export faces an increase in its costs due to the forced reduction in cargo tonnage, causing ships to arrive at their destination with less merchandise.
Other ships of greater capacity must resort to other ports, such as those located in the south of Buenos Aires, to fill their warehouses and be able to complete themselves. This situation has led to a greater need for origination in the southern terminals, mainly Baha Blanca, widening the FAS price differential with respect to grain placed in the Up-River. Said plus grew to 32 US $ S / ton if we consider the prices published by the corresponding Arbitration Chambers of Cereals, while a month ago this spread was about 14 US $ S / ton.
By Eugenio Irazuegui, Head of Research at Enrique R. Zeni and CIA
Source: Agricultural Management Center