South America’s Soy and Corn Crops at Risk of Production Declines, Gro Models Show

Production prospects for South America’s soybean and corn crops are deteriorating, Gro models show, as dry conditions brought on by La Niña drag down yields. While rain showers could still boost crop outcomes, current forecasts call for below average precipitation and above average temperatures to continue in drought-hit regions of Brazil and Argentina. 

Gro’s Brazil Soybean Yield Forecast Model currently indicates a sizable production decline for 2021/22. A contraction on this scale would take global soybean ending stocks to levels not seen since 2015/16, while pulling the global stocks-to-use ratio to its tightest reading since 2014/15. By comparison, the USDA’s latest forecast is for a record Brazil soybean crop.

The declining outlook for Brazil’s soybean crop drove soybean futures on the CBOT to new contract highs on Friday. 

Brazil is the world’s largest soybean producer, and exports nearly 70% of its crop. A decline in Brazilian output could have consequences for company purchasing decisions worldwide, including in the packaged food manufacturing and protein processing industries. Shifts in global trade flows also would impact merchandisers and dry bulk shippers.

Heading into this year, Brazil looked positioned for record-breaking soybean production, aided by a 3.7% year-over-year increase in acreage. But now drought looks poised to reduce yields in Brazil’s southern states of Paraná and Rio Grande do Sul, which together produced about a third of Brazil’s soybeans last year. Soybean harvest in the south will get underway in February or early March.

Soybean croplands in the country’s northern states of Mato Grosso and Minas Gerais, where harvest will begin this month, are swinging between adequate and excessive moisture, and yield estimates in these regions have held steady. Follow the Gro Brazil Soybean Yield Forecast Model, which forecasts yields at the district and state levels, to monitor Brazil’s soybean crop as its harvest nears. 

For Brazilian corn, Gro’s Brazil Corn Yield Forecast Model currently forecasts a jump in total corn crop yields versus last year’s La Niña-impacted crop. But, because the country’s second and larger corn crop won’t be planted until February, dry conditions will remain a concern this season. The US Climate Prediction Center forecasts a 95% chance that La Niña will continue through the South American summer.

In Argentina, dry conditions linked to La Niña are also threatening soybean and corn crops. It is still very early in Argentina’s soybean growing season, but Gro’s latest yield forecast model estimate suggests a slightly smaller crop than the USDA’s forecast. During the next two weeks, below average precipitation and higher-than-normal temperatures are forecast for northern Argentina’s soybean growing regions, as shown by Gro’s Climate Risk Navigator for Agriculture.  

According to Gro’s Argentina Corn Yield Forecast Model, the country’s corn production could also decline this year, as an expanding drought hits the major corn growing provinces of Santa Fe, Cordoba, and Buenos Aires. 

Argentina is the world’s largest exporter of soybean meal and oil, and a top corn supplier. Weather forecasts in Argentina are watched closely by crop traders and the government, which relies on agricultural exports for badly needed tax revenues.