April 2, 2009

Argentina's soy crop is estimated to drop 10 million tonnes this year with exports totalling 37 to 39 million.

 

This means the country will receive US$3.5 billion less and will see revenues contract by US$1.2 billion.

 

This is particularly serious with mid term elections only three months away, an unending conflict with farmers precisely over the 35 percent export levy on oilseeds and the promised 30 percent share of those funds with provincial governments, less generous than expected.

 

Besides, this coming turbulence has already reflected in the money market which has seen the Argentine peso loose 7.5 percent against the US dollar in the first quarter.

 

In 2008, Argentine soy exports reached US$16.5 billion, 23 percent of all Argentine exports, which in tax revenue terms represented US$5 billion.

 

Soaring international prices and higher profits per acre turned soy in the bonanza crop of the last few years, advancing over other more traditional crops such as corn, wheat, cattle fattening and dairy farming.

 

In effect, this last summer crop begun with a record area dedicated to soy, 17.2 million hectares but this year, due to the worst drought in decades, yields in some areas have dropped to 30 percent to 40 percent of the 2.7 kilogrammes per hectare of the 2007-08 crops.

 

Meagre results have also been extensive to corn and wheat, with crops down in the range of 50 percent also due to the combination of drought, expansion of soy and the ongoing conflict with the Argentine government over export taxes.

 

Argentine export surpluses this year for corn have been limited to 6 million tonnes and wheat to half a million tonne.

 

Overall this means that Argentina's total grains and oilseeds crop will be scratching 70 million tonnes, down from the 97 million tonnes of last year and even far from the over 100 million tonnes forecasted at the sustained current growth of farmland production.

 

And if the conflict with the Kirchner administration persists, the coming crop year can be expected to see an even smaller volume as penny short and discouraged farmers will not be enthusiastic about planting or breaking the 100 million-tonne milestone.

 

The Economics Statistics Office from the Argentine Rural Society estimates that the lost crop will represent a two point drop in Argentina's GDP.