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Dry La Niña weather pattern emerging in South America, posing potential risk to crop yields. While we acknowledge that room still exists for the weather to improve from here, we see production shortfall risk increasing should wetter weather in Argentina and Southern Brazil not materialize over the next 2 weeks. Planting progress, particularly in Argentina, has been delayed due to dry weather, and the second corn crop in Brazil could also fall short due to the delayed soybean harvest. No-return point in just 2-3 weeks.
India exporting sugar again: it has allowed exports of 0.5 mn MT under open license. We believe this will be enough to catalyze next up-cycle in Indian prices supported in the tight global balance (in Brazil, Unica expects total crushing to be below 560 mn MT).
Agriculture poised for new records in 2011: Production shortfalls in the US, concerns over the Australian wheat crop, continued issues in Eastern Europe, and extremely strong demand has continued to lift ag commodity prices and benefit farmers’ bottom lines. 2011 farm profitability now appears poised to reach a new record. We would play it by owning fertilizer producers (POT.N, MOS.N, CF.N), seed producers (MON.N.), fertilizer retailers (FHER3.SA), or land/farming companies (SLC, BrasilAgro).
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