A pesky weather system is preparing to wreak havoc on grain production from South America by minimizing nourishment for crops in the form of rainfall, according to published reports.
Oil World reports the fourth quarter of this year might see a manifestation of La Niña, which would impact key-growing regions of two nations. Southern Brazil and central Argentina would be prone to parched and stressed crops should "The Little Girl" exact its wrath as it has previously.
Central Brazil already is dealing with dry weather, which has been impacting the region since the beginning of the second quarter. La Niña would deliver significant amounts of rainfall to the region in December, but that might be too late to assist the crops' development, according to Bloomberg, which cited the German publication.
"At the moment, sea-surface temperatures are near normal across the equatorial Pacific Ocean, but there are indications that anomalies are developing, creating La Niña conditions and probably reducing rainfall in some important oilseed- and grain-growing areas of South America," Oil World reports.
Argentina is Latin America's second biggest wheat exporter and the globe's second-largest shipper of corn, according to Bloomberg. Brazil occupies the world's second rung for shippers of soybeans as the U.S. is top shipper of corn and soybeans.
Corn, which like soybeans has been the subject of increased demand from China, has increased roughly 14 percent in value thus far this year but soybean prices have sunk more than 4 percent.
After the U.S. Agriculture Department reduced estimates earlier this month of stockpiles for corn and inventories for soybeans, Brazil and Argentina endured added pressure to make up for that shortfall.
Reuters reports Tuesday saw mild losses for futures for corn, soybeans and wheat from trading in Asia, correlating the minimal losses with the gradual strengthening of the U.S. dollar. Another factor was reduced crop conditions and, since that downgrade was expected, the U.S. grain belt saw a measure of stability.
The losses on Tuesday conflicted with Monday's gains, which were attributable to increased confidence among investors in the U.S. stock market.
Wheat futures in the U.S. were driving toward a sizable recovery on Tuesday, propelled by spring wheat crops in Minneapolis rising to their highest prices in 60 days amid preoccupations about acreage and the well-being of the crops, MarketWatch reports.
Lower yields of spring wheat, which are most largely produced in North Dakota, prompted significant amounts of farmers to take out insurance policies.
Broker Doug Berman of MF Global wrote that North Dakota saw extremely wet weather earlier in the year.
"There is plenty of wheat around the world, but there could be shortages of hard red spring wheat if U.S. production disappoints," Berman's note states.
Should the weather system manifest off South America, the continent's increasingly prominent status as a shipper would be compromised, according to Oil World.
So too would the globe's supply of those commodities because of reductions to U.S. inventories.
"South America has grown in importance as an exporter of soybeans, soy oil and meal, satisfying a growing share of world import requirements because U.S. export supplies have been insufficient," according to the German researcher.
Yet nations in South America already are suffering and are prone to endure even more reductions because of inclement weather. Earlier this year, the nations produced a record amount of soybeans, exceeding 136 million metric tons.
The end of this month will see stockpiles of soybeans from Brazil top out at 26 million tons, a 39 percent increase as compared to figures from August 2012.
"Although larger-than-expected soybean stocks will be available worldwide at the end of August 2011, the prospects for a decline in world soybean production in 2011-2012 will tighten supplies, raising prices of soybeans, oil and meal well above the levels expected up to now," the German publication states.
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