Oil World fed the concerns over the damage caused by hot and
dry weather to Argentine crops by cutting its estimate for the country's soybean
harvest, and cautioning over the threat of further downgrades.
The influential analysis group cut its forecast for the soybean
harvest in Argentina, the third-ranked grower and exporter of the oilseed, by
1.0m tonnes to 52.0m tonnes.
The downgrade left the harvest well below the 56.0m-tonne
crop Oil World had initially expected, before persistent rains slowed sowings
and raised the risk of farmers ditching some seeding plans.
However, Tuesday's revision reflected too little rain,
rather than two much, with a dry spell which kicked in last month, leaving some
soybean-growing regions with 10-20% of normal rainfall during a key growing
period, cutting yield hopes.
Key price determinant
And this downgrade may not be the last, Oil World said,
cautioning that "if the dryness continues until early February, soybeans and
other summer crops will be stressed and the yield potential reduced".
While the German-based group raised its estimate for the
Brazilian soybean crop by 500,000 tonnes to 81.5m tonnes, citing favourable
weather, it was the Argentine harvest which was more important in pricing
terms.
"The weather conditions in Argentina in coming weeks will
determine whether the current risk premium on prices must be raised further or
whether we will experience seasonal supply and price pressure with fund
liquidation," Oil World said.
'Not much rain
expected'
The group's forecast is below a 55m-tonne estimate from the
Argentine government, and a US Department of Agriculture number downgraded to
54.0m tonnes two weeks ago, reflecting lower estimates for yield and plantings.
And it comes amid an increased focus on hopes for South
American crops, which many buyers are relying on to refill pipelines depleted
by drought-hit harvests in South America and the US last year.
Separately on Tuesday, Paul Georgy, president of US broker
Allendale, noted that "Argentina received a little less rain than was forecast
this weekend", and that "not much rain is expected in the 10-day forecast".
"We will likely begin to see some reduction in production
out of Argentina if this weather pattern continues."
'Raising some
concerns'
At RJ O'Brien, Richard Feltes termed the weather outlook "positive"
to crop prices, "with southern Brazil/ Argentina experiencing net drying over the
next two weeks"
"Models vary on how long the Argentine heat will persist,
but agree that above-normal temperatures will up the importance of timely, early-February
rains."
Benson Quinn Commodities said: "Argentina and southern
Brazil will see only light showers over the next seven days with top soil
moistures in decline.
"This drier pattern appears to be in place into early February
raising some concerns for Argentine corn that is pollinating and Brazilian beans
that are in the blooming and pod-filling stages."
Chicago soybean futures for March delivery stood 1.2% higher
at $14.47 a bushel at 09:00 local time (15:00 UK time).