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.
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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.
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:
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.
There are three main factors that cause concern regarding volatility:
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.
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:
In addition, it is important for producers to pay attention to the most frequent mistakes in the market, such as:
Therefore, the best approach is usually a phased strategy, combining partial sales or purchases, hedging with options, and constant monitoring of crop updates.
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.
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.
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