USDA Trims South America Crop Estimates, but Gro Predicts Deeper Cuts Are Needed

The USDA in its February WASDE report cut its estimates for South American corn and soybean production, bringing the department’s projections closer to Gro’s own forecasts. But Gro predicts even further USDA cuts will be needed given continuing dry conditions in Brazil's and Argentina’s chief growing regions.  

South America’s upcoming harvests are critical to replenishing currently tight global supplies of many major commodities. But a second consecutive year of drought in Argentina and southern Brazil, brought on by La Niña, means the continent’s agricultural production is headed for significant declines, Gro’s machine-learning models show. 

Gro’s forecast models update on a daily basis, in contrast to monthly WASDE estimates, providing actionable insights around questions of supply, demand, price movements, and trade flows. For an in-depth look at South America’s current season’s prospects, download our new Strategic Assessment, “2022: The Year South America Drives Global Agricultural Markets.” 

The USDA lowered its estimate for soybean production in Brazil, the world’s largest producer, to 134 million tonnes, which is 3.6% below last month’s WASDE forecast and down 2.9% from last year’s output. Gro’s Brazil Soybean Yield Forecast Model calls for a steeper decline for Brazil’s soybeans. 

Brazil’s downward slide for soybeans gives the US the opportunity to pick up additional export business, and Gro projects a greater increase in US soybean export demand than the USDA forecasts. FOB soybean prices in Brazil have lost much of their advantage versus US prices at the Gulf. Just since Friday, 1.5 million tonnes of US soybeans have been flashed to either China or “unknown” destinations, with two-thirds of that slated for 2022/23. You can monitor Gro’s US Soybean Export Forecast Model as the estimates update.

The USDA also trimmed its estimate for Argentine soybeans by 3.2%, to 45 million tonnes, compared with last month’s report. But Gro’s production forecast, driven by Gro’s Argentina Soybean Yield Forecast Model, is much lower as dryness and record heat in January crippled crops. 

The USDA cut its production estimate for Brazil corn by nearly 1%. While Brazil’s larger, second corn crop is only now being planted, dry conditions in the country’s south, and excess rain in the north, could impact final production. You can monitor Gro’s Brazil Corn Yield Forecast Model for updates. 

For Argentina corn, the USDA kept its outlook unchanged. But Gro’s Argentina Corn Yield Forecast Model shows the crop has been irreversibly damaged by intense dryness. A decline in South America corn production could benefit US corn exports, which are extremely competitive globally as shown by FOB prices. 

South America production will greatly impact US farmers’ planting decisions in coming weeks. Join Gro’s research analyst team as we host a webinar on March 3, What Will Farmers Plant in 2022?, to hear our predictions for US planting intentions for the upcoming season.