05 April 2013 19:20 [Source: ICIS news]
MEDELLIN, Colombia (ICIS)--Weather risks will affect energy and agricultural commodity markets by the consequent volatility, Jeffries analyst Laurence Alexander said in an industry note on Friday.
The current weather outlook suggests US corn yields could be 2-5% below trend, as April rainfall will likely not suffice to fully break the drought, Alexander said.
US soybeans are projected at 0-2% below trend, while Brazil’s safrinha, or second crop, yields are projected at about 5% above trend, the note said.
In Brazil, weather patterns are favourable and the second corn-growing season is about to start pollinating, suggesting that Brazil exports could be higher this year.
The outlook forecasts lower crop prices, more credible seed yield comparisons and increased crop protection chemical sales in the second quarter.
Drought conditions persist in the Midwest, according to data from the US National Oceanic and Atmospheric Administration (NOAA).
According to the weather agency, moisture levels have improved in the Midwest, but the Great Plains remain dry. April is projected to be the key to break the drought. It would take the unlikely occurrence of seeing 2-4 inches of above-normal rainfall to break the drought, NOAA said.
But as long as farmers can plant by mid-April and mid-May, production should be fine, Alexander said.
US soybean yields appear to be on track to be within 2% of trend, he said. The key swing factor will likely be whether heat in August impairs yields, he said.
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