Monsoon running late to Brazil's row-crop party…

By Peter McMeekin

As the soybean planting window fast approaches, the influence of Brazil’s weather increases significantly as a driver of global grain production and agricultural commodity prices. And other than some scattered showers over parts of Mato Grosso, the forecast for at least the next two weeks is extremely hot and devoid of the required planting rains.

The timely planting of Brazil’s soybean crop each year is critical to the nation’s final corn production. A late plant means a delayed harvest, which then means the planting of the safrinha (second) corn crop, which accounts for around 75 per cent of total production, is also delayed. And the yields of late-planted corn can be quite problematic, as the crop will be hitting peak soil moisture demand just as the dry season hits in May next year.

While there is still plenty of time to replenish soil moisture reserves, the arrival of this season’s monsoonal rainfall is significantly delayed. The building strength and atmospheric stability of the El Nino weather pattern have analysts and traders concerned that there will be insufficient moisture in the topsoil before the middle of October when the soybean planting program should be hitting top gear across Brazil’s central and northern row cropping regions.

Atmospheric conditions are currently preventing the arrival of the cold fronts needed to bring rainfall. An intense mass of warm, dry air continues to block moisture in much of Brazil’s main summer cropping regions. There is a southern Atlantic ridge that Brazilian farmers would dearly like to see migrate much further north, but at the moment, it stubbornly lingers much further south than usual, leaving large parts of Brazil unseasonably hot and dry.

Most parts of Brazil currently require at least 75 millimetres of rain before the planting program could be contemplated. The weather models suggest that will not be forthcoming before October 5, and some models have the dry continuing into mid-October, with no meaningful sign of the mandatory pattern shift. In addition, record or near record daytime temperatures are forecast for central and parts of northern Brazil over the next ten days, further depleting soil moisture reserves and increasing the rainfall threshold required before widespread seeding can commence.

While the late planting of soybeans does not have the same impact on yield as a delayed corn plant, Brazilian farmers are acutely aware of the forecast, and they are likely to tiptoe into the planting program rather than dive headfirst. While some farmers, especially those with a big area to seed, will plant a proportion of their crop dry and wait for the rain to arrive, they will only go all in once widespread and sizable planting rains materialise.

With continued forest clearing, Brazil’s growing area continues to shift further north, reducing the south’s share of total production and its impact on the domestic and global market. Close to 70 per cent of Brazil’s growing area falls outside of the south compared to 50 per cent 20 years ago. El Nino is known to leave a drying effect on the northern half of Brazil, leaving the door open for a much greater yield impact compared to previous years.

Columbia University’s International Research Institute for Climate and Society (IRI) released its latest weather model last week, and it showed continued dry conditions for northern Brazil through to the end of the year, as well as a wetter-than-average spring in the south of the country.

The wet outlook for the south is already playing out, with torrential rain and flooding in some regions playing havoc with the wheat harvest and the summer (first) crop corn planting program. Brazil was looking at record wheat production this season, but unrelenting rainfall across key production areas, particularly in the southernmost state of Rio Grande do Sul, has downgraded the crop in some areas and completely ruined it in others.

According to the USDA, the area planted to wheat earlier this year was 3.4Mha, up from 3.1Mha last season and the five-year average of 2.5Mha. Last season’s production record of 10.6 million metric tonne was set to be broken again this year after a favourable growing season, but production is now unlikely to break the 10MMT threshold as the September rain raises the incidence of disease, punishes test weight in mature paddocks and leads to crop abandonment due to widespread flooding in the south of the country.

Brazil’s national supply company Companhia Nacional de Abastecimento (CONAB) put the 2023/24 soybean area at 45.3 million hectares, up from 44.1Mha in 2022/23. This compares to the USDA’s latest estimate of 45.6Mha, up from 43.9Mha a season earlier. CONAB pegged 2023/24 soybean production at 162.4MMT, up from 154.6MMT at this year's harvest and against the USDA’s 163MMT and 156MMT, respectively.

CONAB estimated the new crop corn area at 21.2Mha, down from 22.3Mha last season, whilst the USDA is at 22.9Mha, up from 22.4Mha a year ago. CONAB is calling corn production 119.8MMT versus 131.9MMT in 2022/23 and compares to the USDA’s 129MMT and 137MMT, respectively. The combined production difference between the CONAB and the USDA of 14.3MMT over the two seasons is quite bewildering, but the slow start to the 2023 monsoon favourS CONAB’s pessimistic outlook at this stage of the season.

While it is still early days for the 2023 row crop planting season, Brazil’s farmers and the global trade will be monitoring the weather outlook with increased purpose, intensity and concern if we get through the next two weeks without rain and the forecast remains unchanged through to late October. Brazil's mildly lower corn production outlook has already been factored into international values. Anything more could make the global corn, and the broader feed grain markets, quite compelling entertainment.

Call your local Grain Brokers Australia representative on 1300 946 544 to discuss your grain marketing needs.