Argentina’s soybean yields could drop: here’s why

Argentina’s soybean yields are expected to fall for the sixth consecutive season as dry climate grip the country’s farmland through January, Reuters reported on Wednesday. 

According to the report, despite rainfall, dry weather is likely to prevail over Argentina’s farmland through mid-January. 

This is likely to affect soybean yields and farmers are at risk of losses. 

However, the report said that the dryness this time was not surprising due to the presence of La Nina.

La Nina is the cool phase of the equatorial Pacific Ocean. 

La Nina-induced dry spells in the country have greatly affected soybean yields in recent years. 

No rainfall relief

According to Reuters, rainfall in Argentina during November was 30% higher than usual, which was in contrast with the trend seen in La Nina years. 

But, in December, the impact of La Nina was more pronounced as precipitation was just 79% of normal. 

Argentina’s grain cultivation is also expected to face the brunt of the La Nina phenomenon. 

Grain exchanges of Argentina reportedly said last week that the recent hot and dry weather has already started damaging crops. 

According to forecasts, the current situation could get even worse.

These forecasts have projected that monthly rainfall in Argentina’s grain producing regions after the third week in January may only amount to a third of the normal levels. 

If forecasts turn out to be right, the prospect for both soybean and grain crops would be dire. 

Reuters said only one of Argentina’s exceptionally dry January occurred within the last ten years in 2018. 

Can crops be resilient?

If crops are better maintained and more resilient to dry conditions compared to 10 years ago, it could limit the impact of the adverse weather on yields. 

Also, rainfall in February could rescue the situation for soy farmers. 

According to the report, the soybean crops are in decent condition currently. 

However, satellite images showed that the condition of crops was in a better position in December 2023 than it was last month, Reuters said. 

In the previous season, the soybean crop was disappointing despite the favourable El Nino conditions.

However, production was nearly twice that of the 2022-23 season, which was severely affected. 

Argentina’s crop disaster: turning point for prices

Global soybean and soybean meal prices were higher over the last two seasons.

The crop damages in 2023 also boosted prices further. 

As there were damages, soybean meal prices surged 20% through the end of 2022 and mid-February 2023 as Argentina is the top exporter. 

According to Reuters, speculators at the end of December held a record net short positions in Chicago soybean meal futures and options. 

Soybean meal prices on CBOT have sharply fallen over the past few months. 

The crop disaster in Argentina two years ago was a major event.

This year soybean yields may not suffer as much, but dry conditions can keep bulls firmly in control of the market.