Argentina Corn Production Cut
The Rosario Grain Exchange has lowered its estimate for Argentina’s corn production to 46 million metric tons (MMT), down 2 MMT from its previous estimate– 4 MMT below the USDA’s revised estimate from Tuesday. The cut is due to dry weather earlier in the growing season, which has taken a toll on crop conditions. Only 16% of corn and 15% of soybeans are currently rated in good condition.
Impact on Markets
The Rosario Grain Exchange production cut sent corn, soybeans, and wheat futures higher overnight. The cut is significant because it suggests that the recent improved weather in Argentina has not been enough to offset the earlier damage. The question now is whether the market has fully priced in the production cut. If not, prices could move higher.
Other Factors
In addition to the production cut, other factors are also supporting grain prices. These include:
- President Trump recently raised the import tariff on Brazilian ethanol. This will limit imports and increase domestic ethanol use, which should boost demand for corn.
- The dollar index is trading lower this morning. This makes U.S. grains more attractive to foreign buyers.
- Weather forecasts for Argentina, southern Brazil, and Uruguay are favorable. This could lead to further production cuts being priced into the market.
Technical Analysis
The March corn contract is in a bullish trend and recently made new highs. A close below 472.5 cents per bushel would signal some bearish sentiment. The March soybean contract is slightly negative, but a close below 1022 cents per bushel would bring more selling pressure.
Bottom Line
Grain prices are likely to remain supported in the near term due to the production cut in Argentina and other factors. However, the market has already priced in some of the production cuts. If prices move too high, there is a risk of a correction. Investors should continue to monitor the situation and consider taking some profits if prices move significantly higher.
