The author is a partner of Nóvitas SA: Diego de la Puente @ddlp_ddlp for @LANACION

For the grain market, the fundamentals of supply and demand are extremely important when defining the future of prices in the medium and long term. And this is a process that is being built over time. Clearly, several years of bad harvests on stocks are not the same as the opposite.

In this sense, the accumulation of events in the same trajectory generates processes of high or low prices. Next week the United States Department of Agriculture (USDA) will release its traditional monthly figures. And, as expected, the operators' attention will be focused on the US production data, both in corn and soybeans.

The situation is not easy to resolve for the USDA, since the stocks in that country and for both products are very tight (especially soybeans), but continue estimating harvests close to the record with the climatic conditions that occurred in the northwest of the The American Midwest throughout the growing season doesn't seem likely either. Even more so if the deterioration of the crops from sowing until now is taken into account

On the other hand, the climatic conditions in different parts of the planet are far from ideal. Whether due to lack of rain or excesses, the truth is that in much of the globe rumors of adjustments in production are growing and, it is there, where the harvest estimates - also record by the USDA for the 2021/2022 cycle - they generate many doubts.

"We are forcing the production machinery to achieve huge harvests, but with a climate that has not been accompanying," was the comment of one of our contacts from Chicago. To which he added: "Although here we had the levels of yields that the USDA says, stocks are still very low and we still have to see what happens in the rest of the world for a 2021/2022 campaign that is just beginning."

Climatologists have not been sparing comments on the need to be attentive to how the water temperature is evolving at the height of the equatorial Pacific, a situation that would define the occurrence of the Niña o Niño phenomenon. Everything tends to indicate that the projected cooling would determine the occurrence of a Girl year, the problem is that it would also occur with a Girl background.

In similar years, and taking soybean yields in our country as an example, they have been reduced between 18 and 55 percent. On the other hand, Brazil (the largest soybean producer in the world) should start with the soy plantation in the north during the next month. Judging by the conditions of useful water reserve in the soils of Mato Grosso and by the forecasts for the next 15 days, the start does not seem too auspicious, although, of course, it may change.

In this sense, there is still a long way to go and the weather is not the only variable that today “feeds” price volatility. But, without a doubt, what happens in these latitudes with the rains and with the temperatures will set the pace of prices to come. To follow carefully.

The author is a partner of Nóvitas SA

For Diego de la Puente