The Great Plains isn't the only place struggling with drought right now.
From Bloomberg BusinessWeek:
Argentina Drought May Cut South American Corn, Soy Production
Oct. 4 (Bloomberg) -- Drought in Argentina and dry weather in parts of Brazil is threatening crops in South American countries, Hamburg-based researcher Oil World said in an e- mailed report today.
A “severe” drought in Argentina, the second-biggest exporter of corn and third-largest shipper of soybeans, may cut yields and production, Oil World said. Dry weather in Mato Grosso state in Brazil, the second-largest shipper of soybeans and third-biggest exporter of corn, will harm plants if precipitation doesn’t fall soon, the researcher said.
“At the moment several important agricultural areas in Brazil and Argentina are reporting soil moisture deficits,” Oil World said. “If those are not repleted by favorable rains in coming weeks, yields and production of soybeans and other crops will be threatened.”
Corn futures plunged 23 percent in September, the biggest such loss since June 2009, and soybeans dropped 19 percent on speculation the European debt crisis will curb demand for raw materials used to make food.
Only 22 percent of normal rain fell in the Argentina province of Santa Fe, with a quarter to a half of the normal amount in Entre Rios, La Pampa, 40 percent in Cordoba and 49 percent in Buenos Aires province, according to the report. Corn growers in the country seeded only 13 percent of the intended area through Sept. 29, half of what was planted in the same period last year, Oil World said.
South American Supplies
“With Northern Hemisphere soybean production declining sizably this autumn the global market will become increasingly dependent on South American supplies in 2012,” the researcher said. “If the moisture deficits are not repleted by well-spread and sufficient rainfall during October and November, Argentine soybeans and other crops will be in trouble.”
Falling yields in Argentina and Brazil would be bullish for prices in the medium term, Oil World said. Traders probably won’t react to weather concerns in South America until November, according to the report.
Demand for soybeans and soybean derivatives may boost prices as biodiesel production rose 35 percent in the year through September, Oil World said. Argentine biodiesel output through September probably totaled 2.27 million metric tons and exports gained 18 percent, according to the report. Soybean oil stockpiles also declined on increased biodiesel production.
“Biodiesel production increased more sharply than expected on account of rising demand,” the researcher said. “With soya oil the major feedstock, the accelerating domestic consumption curbed Argentine soy oil exports and reduced stocks more sharply than expected.”
--Editors: Sharon Lindores, John Deane