Summer crop production forecasts are tumbling in South America as drought conditions continue to build soil moisture deficits and crop stress in Southern Brazil and much of Argentina.
The La Nina weather pattern threatens to scuttle the production potential of large tracts of this season's corn and soybean plantings, further tightening global balance sheets.
Ironically, it is a tale of two woes for Brazil - it is too dry in the south and too wet in parts of the north.
Harvest has started about 20 days earlier than last year on the earliest planted crops.
But frequent rains in the northern states have resulted in harvest delays and quality downgrades.
While not an issue at this early point in the season, the rains are also delaying planting of the second corn crop into the recently harvested fields.
But the dryness in the south is the biggest issue, with Paran - the country's third-biggest soybean producing state - the hardest hit.
The drought has engulfed the state at such a rapid rate that, late last week, only 30 per cent of the crop was considered to be in good-to-excellent condition.
That is down from 57pc two weeks earlier and 92pc in early December.
About 31pc of the soybean area is in poor condition.
To put this in perspective, in recent years, the worst early January rating for the Paran soybean crop was 58pc good-to-excellent and 12pc poor in 2019.
The second worst was in 2021, when the crop was rated 79pc good-to-excellent with only 3pc in poor shape.
Brazil is the world's biggest producer of soybeans - almost 70pc of which are exported.
A decline in Brazilian output will have significant consequences for global supply and demand outcomes.
There have been production downgrades from several prominent private consultancies and market analysts in the past week.
Dr Michael Cordonnier cut his Brazilian soybean production estimate by another 2 million tonnes to 138 million tonnes last week, after slicing the same amount off his forecast just a week earlier.
Brazil based consultancy AgRural cut its soybean crop estimate by a whopping 11.3 million tonnes to 133.4 million tonnes and is now forecasting the smallest crop since the 2015-16 season.
AgRural said that Paran had undoubtedly been the hardest hit.
But production forecasts have also been reduced in Rio Grande do Sul, Santa Catarina and - to a lesser extent - Mato Grosso do Sul.
Further north in Mato Grosso, the biggest soybean producing state, the season has been much kinder, and harvest has started.
Early yields there are in line with expectations, according to AgRural.
StoneX joined the downgrade club last week, slashing 11.1 million tonnes off its soybean estimate to sit at 134 million tonnes.
Brazil's National Supply Company (CONAB) is yet to react to the worsening production situation and is sitting at 142.8 million tonnes.
Likewise, the United States Department of Agriculture (USDA) forecast is currently at 144 million tonnes.
But that is expected to be lowered when its latest World Agricultural Supply and Demand Estimates (WASDE) are released this week.
On the corn front, Cordonnier is pegging Brazilian production at 113 million tonnes, which is down 1 million tonnes week-on-week and the third such decrease in the past three weeks.
StoneX lowered its corn production estimate to 117.5 million tonnes, down from 120.1 million tonnes in December.
CONAB currently has corn production pegged at 117.2 million tonnes, which is up 34.6pc on last season's crop.
The planted area is expected to be 5.1pc higher at 20.9 million hectares.
There is still plenty of time for corn production to recover as the country's second (safrinha) crop is much bigger than the first.
While planting has started on the early harvested soybean fields, much of the crop will not be planted until next month.
But La Nina tends to cut the wet season short.
The concern for Brazilian producers is that delays to the planting program could leave the crop susceptible to moisture stress late in the growing season.
In Argentina, La Nina does not necessarily mean a poor summer crop season.
But most of the country's driest years, and poorest yields, have coincided with a La Nina weather phase.
A majority of the country's main summer cropping areas have experienced dry conditions since mid-December, and temperatures have soared in the New Year.
Hot and dry conditions are forecast to continue across Argentina for much of the next week, followed by some unsettled weather.
Still, the rainfall is not expected to be substantial enough to dent the moisture deficit situation significantly.
The corn area is forecast at 7.3 million hectares, with the 77.3pc planted as of last week suffering badly under the drought conditions.
As of last Thursday, 40pc of the corn crop was in good-to-excellent condition. This was down from 58pc a week earlier.
In the same period, the poor-to-very poor category rose from 8pc to 21pc.
Not surprisingly, the moisture condition rating fell from 79pc to 63pc optimum/favourable in the first week of 2022.
The poor/dry rating increased from 21pc to 37pc of the corn area.
Planting of the soybean crop is a little more advanced than corn, with 86.8pc of the projected 16.5 million hectares planted as of last week.
But the crop condition has suffered a similar deterioration.
The good-to-excellent rating fell from 56pc to 48pc in the week to last Thursday, and the poor-to-very poor rating climbed from 8pc to 13pc.
The moisture condition of the soybean area dropped from 69pc optimum/favourable to 58pc, but was still well ahead of the 49pc at the same time last year.
The Buenos Aires Grain Exchange is still forecasting a record corn crop of 57 million tonnes for the world's second-biggest exporter.
But the early crop generally has the highest yield potential, and the exchange admits the bias is lower if the current weather conditions persist.
The Rosario Grain Exchange is forecasting a corn crop in the 55-56 million tonnes range.
Cordonnier is at the lower end of estimates at 52 million tonnes, and the USDA sits in the middle at 54.5 million tonnes.
The Buenos Aires Grain Exchange currently has Argentine soybean production pegged at 44 million tonnes, against the Rosario Grain Exchange estimate of 45.7 million tonnes.
Cordonnier lowered his estimate by 3 million tonnes last week to 45 million tonnes, and the USDA currently sits at the high end on 49.5 million tonnes - with an update due this week.
The weather conditions and summer crop production cuts in South America will continue to be key market drivers in the short-term.
First it will be the plight of soybean production. But corn will very quickly become an issue if the rain gods fail to turn on the tap in the very near future.