April 23, 2009

Extremely tight farm financing in Argentina will lead to a steep decline in planted area next season, according to Argentina's so-called "Soy King."

 

"There isn't going to be financing, and this is one of the reasons I'm so pessimistic and expect an enormous amount of hectares being left un-planted," Gustavo Grobocopatel, president of the regional growing giant Grupo Los Grobo said.

 

Grobocopatel earned his nickname from the local press for his company's leading role in growing the ubiquitous beans in Argentina and across the region.

 

"For sure, there will be a million hectares less area planted with wheat," Grobocopatel said.

 

That would mark a drop of over 18 percent from the 5.4 million hectares planted during the 2008-09 season.

 

During the 2008-09 season, Argentina's wheat production plunged to 8.3 million tonnes, the lowest output in 27 years, as farmers cut back on planted area and a brutal drought battered the crop.

 

If the grim forecasts for 2009-10 production hold, there is likely to be little available for export over the seven million tonnes expected to be set aside for domestic use, said the president of the agricultural trade office, or ONCCA, Emilio Eyras.

 

"We will only authorise wheat exports if a surplus over domestic demand is confirmed," Eyras said.

 

ONCCA must approve all farm exports and only issues permits once domestic supply has been assured.

 

In addition to tight credit, farmers are wary of putting seed to soil due to a return of drought conditions again ahead of winter wheat planting.

 

Insufficient rainfall across Argentina's Pampas over the past month has led to drought conditions across much of the farm belt, which may have a serious effect on wheat planting, the Buenos Aires Cereals Exchange said in its climate report Friday (Apr 17).

 

With winter wheat and barley planting set to kick off this month, conditions are so dry in the southern areas that wind is carrying away topsoil, "a true ecological disaster," the exchange said.

 

"Hopefully there won't be a drop in wheat production again, and we're expecting the early forecasts for wheat area soon, but it's very dependent on the drought," Eyras said.

 

But many analysts are also predicting a sharp decline in wheat production.

 

"The low price for wheat relative to other crops, the government's failure to deliver on promises to achieve minimum prices, the farmer's fragile financial situation, lack of credit and unfavorable weather will lead to a decrease in planted area of 5 percent to 10 percent from last season, but worse will be the decreased use of technology and planting in marginal fields, which will potentially cause yields to fall by 15 percent to 20 percent," Lartirigoyen analyst Francisco Mariani said recently.