Soybean Market Looks South
CHICAGO (AP) _ As winter settles into the Windy City, soybean traders on the Chicago Board of Trade are looking to the south with more than vacations in mind.
It’s springtime in Brazil and Argentina, respectively the world’s second- and fourth-largest soybean producers, and a dry spell during the South American planting period could prove to be the seedling of another drought rally in the soybean market.
″It’s sort of analagous to what happened here in the Midwest in May or June,″ said James Candor, senior forecaster with Accu-Weather Inc., a private meteorological information service in State College, Pa.
″There’s still time for the crop to recover if it turns rainy,″ he said. ″But if it stays this dry for the rest of this month into early January, then problems will really start to mount.″
Other experts say the South American weather could stay dry into late January with no significant damage to the soybean crop, and the plants won’t enter their most critical growth phase until mid-February.
But soybean futures traders are scrambling for every available scrap of South American weather information and a recent upswing in prices reflects the generally bullish outlook.
Soybeans for delivery in March on the Chicago Board of Trade hit a recent low of $7.42 1/2 a bushel on Nov. 18. On Friday, the contract settled at $7.85 1/4 .
No one is predicting a return to the highs near $11 a bushel reached in July on panic buying linked to the Midwestern drought.
But, said Jerry Zusel, manager of CBOT floor operations for Balfour Maclaine Corp., ″if South American production falters because of weather - and nobody has that answer yet - prices could go up by $1 to $1.50 bushel over next several months.″
The U.S. soybean market has grown more sensitive to the status of the South American crop in the last 10 years as South American production has expanded to satisfy the world’s increasing appetite for protein.
In 1981, Brazil produced about 470 million bushels of soybeans and Argentina grew about 154 million bushels. Last month, the Agriculture Department estimated Brazil’s soybean output for the 1988-89 season at the equivalent of 734 million bushels and Argentina’s at 404 million bushels.
The United States is the world’s largest producer with this year’s output estimated at 1.51 billion bushels. But that figure represents a 21 percent decline from the 1987 U.S. harvest, and the nation’s surplus stockpile is expected to dwindle by the end of August to a scant 125 million bushels as a result.
Because of the sharp reduction in U.S. supplies, ″the South American weather this year has probably become the most important in history as far as soybeans are concerned,″ said Charles Notis, a founding partner of Freese- Notis Weather Inc. in Des Moines, Iowa.
Soybean traders say the South American weather information available from private forecasters varies greatly from one meteorological firm to another and seems less reliable than U.S. weather data.
The private forecasters say those problems often stem from their difficulty in getting data from the weather services run by South American governments.
″It seems that quite often when it rains down there, for some reason they don’t like to report what happened, how much rain fell,″ Notis said. ″Their regular reporting stations sometimes don’t report.″
Peter Leavitt, executive vice president of Weather Services Corp. in New Bedford, Mass., said the information his firm receieves through official channels sometimes comes in garbled or just plain wrong.
″Last week Campo Grande (the location of a Brazilian reporting station) transmitted 24-hour precipitation of 92 millimeters but it actually received only 0.2 millimeters,″ Leavitt said. ″That’s the difference between 3.6 or 3.7 inches and a trace.″
So private forecasters rely heavily on data from weather satellites. And even though satellite accuracy fades the farther you get from the equator, ″satellites don’t lie,″ Notis said.
Private forecasters were hesitant to make long-range predictions about South America’s soybean weather. But Leavitt cited a cooling of ocean surface temperatures, which he called the ″La Nina″ effect, the inverse of the better-known ″El Nino.″
La Nina is typically associated with dry-weather years in the Southern Hemisphere, he said.
″There are very strong La Nina signals this year, and that’s more likely to give you a crop problem in South America,″ he said.