Weather in Argentina: Impact and Volatility on the Grain Harvest

The weather in Argentina during the month of February is decisive in determining the success or failure of the productive potential of South America’s agricultural calendar, especially in the soybean and corn markets.

This period is considered critical, as a large portion of the crops enters the reproductive phase, which is highly sensitive to thermal and water stress. 

• Critical phases: why February is the decisive month for crop development
• Market dynamics: how the climate risk premium is incorporated into CBOT prices
• Risk management: hedging instruments to protect against volatility
• Common mistakes: what to avoid when aligning trading decisions with climate uncertainty 

 Enjoy the read!

Why is February the most sensitive month for soybeans and corn? 

February coincides with the flowering stage (R1–R2) and the onset of pod formation (R3) for most of the soybean crop. At the same time, many areas planted with corn enter the stages of tasseling, pollination, and the beginning of grain filling. 

These phases are extremely sensitive to water and heat stress. A lack of rain or a few days of extreme heat can significantly reduce the yield potential of both crops. 

In addition, high temperatures during the reproductive period can affect flower fertilization and reduce the final number of grains per plant. While soybeans generally have a greater capacity to compensate, depending on the duration of the stress, corn reacts more quickly, and losses can occur after just a few days of heat or drought during pollination. 

Climate in Argentina: Current Conditions and Production Risks 

The main soybean and corn-producing regions that most influence the market are the areas of Argentina’s core belt, particularly Buenos Aires, Córdoba, Santa Fe, and Entre Ríos, which together account for about 70–80% of national production. Therefore, any weather event in these provinces acts as a direct impact factor on the global market.  

However, the climate in Argentina should not be analyzed in isolation, as it is linked to three key factors: 

• Record production in Brazil, which in many cases offsets Argentine losses;
• Export flows from South America, the United States’ main competitor during the first half of the year;
• Overall stock levels, which determine how much of a crop loss the market can withstand. 
  
  

Volatility on the CBOT and the climate risk premium 

Soybean and corn contracts on the CBOT react primarily to three factors: daily weather updates, reports from Argentine exchanges (Rosario and Buenos Aires), and USDA reports.

Thus, when weather forecasts indicate deteriorating conditions, the market quickly incorporates a climate risk premium, anticipating potential revisions to production estimates.

While January is still relatively early to estimate definitive weather-related losses, volatility increases in February, as it becomes possible to measure grain production potential more accurately. At this point, the risk premium begins to significantly impact CBOT prices.

March, on the other hand, already reflects the full extent of the damage, which helps reduce the level of uncertainty. This scenario explains why the market reacts more strongly to weather-related news in February.

What weather events are causing concern in the commodities market?

 There are three main factors that cause concern regarding volatility:

• Drought and water shortages: this is the most common risk. Following dry spells in December and January, many regions enter February with limited soil moisture reserves, making crop development more vulnerable.
• Heat waves: Temperatures around 35°C–40°C during the reproductive period can reduce flower fertilization and the final number of grains per plant.
• Excessive rainfall: Heavy rainfall, although less frequent at this stage of the growing season, can cause waterlogging, disease, and developmental delays. 
  
  

Impact of forecasts on price formation 

7- to 15-day weather forecasts carry significant weight in price formation. If models indicate regular rainfall, the market tends to reduce the weather premium. 

Conversely, if the forecast points to hot, dry weather, productivity estimates decline and prices rise. Typically, short-term contracts (March/May) react more quickly to weather news. 

Long-term contracts (November/December), on the other hand, reflect the global balance of supply and demand to a greater extent. For this reason, the impact of the weather in Argentina usually first appears in the spreads between maturities. 

What is the role of risk management in this context?

During periods of high volatility, such as in February, timing is key for producers and consumers to align their business decisions with weather uncertainty and protect themselves. In this context, the market typically relies on three main strategies: 

1. Hedging with futures: setting prices to protect margins against declines;
2. Options: strategies using calls or puts that allow for protection while simultaneously participating in favorable market movements;
3. Combined structures: such as collars or fences, widely used by industries and exporters. 

In addition, it is important for producers to pay attention to the most frequent mistakes in the market, such as:

• Ignoring Brazil’s role in the global balance;
• Overreacting to short-term weather forecasts;
• Leaving hedging until after price movements. 

Therefore, the best approach is usually a phased strategy, combining partial sales or purchases, hedging with options, and constant monitoring of crop updates. 

What should the market watch for?

In addition to rainfall patterns in Argentina during February and March, it is essential to monitor the final size of the Brazilian harvest and global demand for corn and soybeans, particularly from China. 

If the weather remains erratic during the reproductive period of these crops, the market could continue to factor in weather premiums into prices, keeping volatility high. 

Stay one step ahead with Hedgepoint

Quality information and market intelligence are essential for navigating the volatility caused by the weather in Argentina and by fluctuations on the CBOT. At Hedgepoint, you’ll find technical expertise and advanced tools to transform weather data into strategic financial protection decisions. 

Would you like to track all the market movements, reports, and analyses that influence the grain market in real time? Subscribe to Hedgepoint Hub and get access to the essential content you need to manage your risks with precision. 

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