All the market talk early this week was about forecasts for frost in some American soybean-growing areas.
That had oilseed prices on the front burner, bubbling higher, but there was other less-talked-about weather news that also could push oilseeds higher.
As I have noted here several times recently, soybeans are in tight supply right now and any reduction in the American crop makes users nervous.
But I have also noted that the strong soybean market is expected to encourage more acreage in South America and a bumper crop there next year could pressure oilseed prices lower.
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But now concerns are growing about dryness in Argentina, the world’s third largest soybean exporter.
A story on this page describes how lack of rain has hurt wheat prospects there already.
Seeding of soy is less advanced in Argentina, but the influential Oil World newsletter this week noted that if dry weather continues interfering with germination in Argentina and parts of Brazil, soybean prices could be brought to a boil.
It is early, but some long-range forecasts indicate a higher probability for the dryness to continue in Argentina to the end of the calender year.
Other longer-term supporting factors are the continuing dryness in much of Europe and the grain-growing areas of Ukraine and Russia.
Prices slow to respond
While improved moisture in the U.S. winter wheat belt and Australia keep wheat prices in check, this collection of weather problems elsewhere is in sharp contrast to the situation of a few years ago when many analysts commented on a surprising multi-year string of good crops around the world.
Now, we have had two years in a row where there were significant production problems at the same time in different parts of the world.
The shortfalls have sparked some short-lived price spikes, but haven’t moved grain prices to a new, higher plateau.
However, if significant production problems do develop in South America this year, the world could get dangerously short of some key commodities and prices could take off.
Most of the seed is not in the ground yet down south, and a lot can change in a short time. But until widespread rain falls in Argentina, the market will be on edge.
