February 12, 2009

Showers fell over Argentina's farm belt Tuesday (February 11), helping buoy expectations of an improvement in soybean crop yields despite one of the worst drought in 100 years, analysts said Wednesday.

 

"The rain helped a lot," said Sebastian Pels, a director of the Granar grain brokerage in Buenos Aires.

 

The showers fell in parts of the provinces of Buenos Aires, Cordoba and Santa Fe, source of nearly 80 percent of the country's soy production, helping relieve drought-stressed crops in a month that is critical for development and yields.

 

The drought, which was at its worst in December and January, has prompted frequent cuts in Argentine 2008-09 soy production estimates.

 

Now with more rainfall so far this month, soy production likely will come in above 40 million tonnes, said Pels.

 

That's better than a worst-case scenario made by the Buenos Aires Cereals Exchange on January 23, when it suggested that production could fall to between 34.5 million to 38.2 million tonnes, or 17 percent to 25 percent less than the 2007-08 season's 46.2 million tonnes, if the dry spell continued.

 

On February 6, the exchange said rains since then improved expectations that output likely will be above 40 million.

 

On Tuesday, the US Department of Agriculture dropped its Argentine soy output estimate 11.5 percent to 43.8 million tonnes due to the drought.

 

The potential that output could come in at the USDA's estimated level or higher has "improved," but that depends on plentiful rainfall this month, said Alejandra Raspo, an analyst at Mercampo, a grain brokerage in Rosario, Santa Fe.

 

"There will have to be more rain in the second half of February," she said.

 

Raspo estimates that output likely will come in at above 45 million, saying that forecasts below that are "too pessimistic."

 

According to Pels, late-planted crops "will make a profit from the rain," while the soy planted early in the season, in September and October, are struggling with low yields because they failed to get sufficient moisture during the critical development period of December and January.

 

A concern is that some weather forecasts call for a spell of dry, hot weather.

 

"The rains of last week and of [Tuesday] averted a crash in production [of soy], but this isn't to say that the harvest is consolidated," Eduardo Sierra, a climatologist at the Buenos Aires Cereals Exchange, told the La Nacion newspaper in Buenos Aires in a report published Wednesday.

 

He is forecasting six or seven days of dry, hot weather, which could stress plants, particularly in Buenos Aires province.

 

He doesn't expect rains to fall again until February 17, but said overall precipitation will be greater this month as well as in March and early April than in January.

 

By the middle of April, rainfall levels could decline again before returning to normal in August, he said.