Market watchers have been following the development of a weak El Niño pattern in recent months, and its impact is beginning to be felt in key areas of the Brazilian soybean crop. Below-average rainfall has been seen across much of central and southern Brazil in December. This pattern, combined with seasonally hot temperatures, has led to some net-drying of conditions in key soybean-producing states of Mato Grasso and Goias. According to Brazilian market sources, these two states typically produce roughly 40 percent of the country’s soybean output.
These net-drying conditions have been seen as trimming the high-end of the region’s soybean yield potential. This past year, Brazil harvested a record soybean crop estimated by USDA at 120.3 million metric tons (MMT). Favorable planting conditions and higher local soybean prices this fall spurred larger seedings for the crop to be harvested in the coming months.
USDA’s December World Agricultural Supply and Demand Estimates (WASDE) report saw that their latest projection was raised by 1.5 MMT to 122.0 MMT, but the recent pattern may prevent additional upward revisions should adverse weather persist. Midrange forecasts suggest that mostly dry weather is to persist across central- and southern-Brazil into the first half of January.