La Nina fears push soy futures up as politicians warn of drought

Soybean futures for delivery in March on the Chicago Board of Trade rose to their highest level in over a week on Tuesday after lower than expected rains hit Argentina, triggering fears over supplies.

According to weather reports, Argentina saw about 1-3 cm of rain over 90-95% of their crops over the weekend, which disappointed traders and sent futures higher.

“Although the rains registered this last weekend alleviated the situation in a large part of the national agricultural area, there were regions in which there was no rainfall and the outlook seems to get complicated as the days go by,” Pablo Pochettino, a broker with Intagra, told Agricensus.

March soybean futures traded as high as $9.70/bu in trade on Tuesday, its highest level since January 8.

While some places in Cordoba and Santa Fe received around 10 cm of rain on Saturday, much of the core region, such as Buenos Aires, received between 2 and 3 cm.

Other brokers have said swathes of the country, including the provinces of Buenos Aires, La Pampa and Entre Rios remain too dry compared to seasonal norms.

Some estimates suggest that so far, precipitation levels remain at around 50% of historical average for certain provinces and the cold system forecast for the coming week will not be enough to replenish the soil moisture.

The situation is said to be particularly acute in Entre Rios, which lies north of Buenos Aires and can hold up to 7% of total soybean supply.

"The government is monitoring the meteorological situation," said Governor Gustavo Bordet of the Entre Rios province in a statement last week, adding that while it wasn’t an emergency, grain production could be impacted.

According to the local cereal exchange, several departments in the province are in a state of drought and it could spread.

“Argentina’s bottom line remains one of concern for much of the summer crop region because of low subsoil moisture, erratic rainfall and warm temperatures,” according to World Weather Inc published by Allendale.

“Crop stress is already present and it has led to some decline in production potential for early season grain and oilseeds. However, improving weather could still have a positive impact on production potential, especially for late planted crops,” it said.