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COLUMN-Relief coming for Brazil's parched corn, soy areas, but trend must continue -Braun

Credit: REUTERS/STAFF

Brazil’s primary corn and soybean growing regions are historically dry as planting for the 2019-20 cycle begins. Rains should begin soon though weather forecasts disagree on the intensity, but either way, analysts see both upcoming harvests hitting new records early next year.

By Karen Braun

FORT COLLINS, Colo., Sept 19 (Reuters) - Brazil’s primary corn and soybean growing regions are historically dry as planting for the 2019-20 cycle begins. Rains should begin soon though weather forecasts disagree on the intensity, but either way, analysts see both upcoming harvests hitting new records early next year.

A week ago, a Reuters poll of 12 forecasters predicted the 2019-20 soybean crop at an all-time high 122.62 million tonnes on a 2.1% expansion in area over last year, the smallest rise in area in 13 years. On Wednesday, a nine-analyst poll pegged Brazil’s new corn crop at 102.3 million tonnes on a 3.4% increase in area.

In the country’s No. 1 and No. 2 corn and soybean states, Mato Grosso and Parana, the last three months were the driest in at least 20 years, zapping the soils of much-needed moisture.

In Mato Grosso, that period coincides with dry season, which should be ending right about now. Weather models as of midday Thursday suggested that rain should begin in the next several days, but the amounts vary by model. The U.S. model implies September precipitation in the Center-West state will be 70% below the recent average, while the European model says the month will end with above-average rainfall. (https://tmsnrt.rs/30kafGQ) (https://tmsnrt.rs/31D0q3Z)

Weather models also contrast in Parana in the country’s south. The American model places September rainfall 48% lower than the five-year average and the European model implies the deficit will be only 13% through Sept. 28. (https://tmsnrt.rs/3081Dmh) (https://tmsnrt.rs/31AlYhP)

Obviously, Brazilian farmers are hoping that the wetter European model proves true, but even if it does not, hope is not lost. Although soybean sowing is off to a slower start, the last ten years of data for the top two states show no correlation at all of soybean yields with planting pace.

All the fastest soybean planting years in Mato Grosso eventually featured above-average corn yields, but the slower years had mixed results. However, second-crop corn yields in Parana have been distinctly lower when the soybean harvests are slower.

If the wet season has safely returned to Mato Grosso by next month, it will be more important to keep an eye on moisture in the southern regions, where rains are not seasonal and therefore less reliable. As such, soybean yields in Parana tend to be much more volatile than those in Mato Grosso.

Soybean yields almost never swing more than a couple of percentage points from the long-term trend in Mato Grosso, but they fell by 12% in 2015-16 on low rainfall and extreme heat. Average temperatures during the growing season were at least two standard deviations above the recent mean.

The risk for second-crop corn in Mato Grosso is that if it is planted too late or moves too slowly, the dry season can begin before the crop finishes. Brazil’s second corn crop comprises nearly three-quarters of Brazil’s total output, and the majority is exported. Last year, Mato Grosso accounted for 42% of that while Parana claimed 18%.

As of Sept. 16, some 24% of first-crop corn was seeded in Parana, but soybeans had no progress reported. On Sept. 17 last year, 37% of corn and 9% of soybeans in the southern state were planted. Parana produces about 12% of Brazil’s first corn crop and Mato Grosso about 1%. Mato Grosso had not yet published any planting progress as of Thursday.

On average over the last five years, Parana’s soybean planting reaches halfway on Oct. 19, while Mato Grosso reaches that mark on Oct. 27.

Graphic- Precipitation forecast for Mato Grosso, Brazil, Sept. 19 GFShttps://tmsnrt.rs/30kafGQ

Graphic- Precipitation forecast for Mato Grosso, Brazil, Sept. 19 Eurohttps://tmsnrt.rs/31D0q3Z

Graphic- Precipitation forecast for Parana, Brazil, Sept. 19 GFShttps://tmsnrt.rs/3081Dmh

Graphic- Precipitation forecast for Parana, Brazil, Sept. 19 Eurohttps://tmsnrt.rs/31AlYhP

(Editing by Matthew Lewis)

((karen.braun@thomsonreuters.com +1 (312) 408-8059 Reuters Messaging: karen.braun.thomsonreuters.net@reuters.com; Twitter: @kannbwx))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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