June 23, 2009

Argentine wheat planting continues to suffer from drought, seriously affecting planting, the Agriculture Secretariat said in its weekly crop report late Friday (Jun 19).

 

"The absence of rainfall during the week ending Friday continues to accentuate the moisture deficit across most of the grain belt," the Secretariat said.

 

"Soil moisture reserves continue to be low or nonexistent," the Secretariat said.

 

The Secretariat hasn't forecast wheat area yet, but Argentina's Buenos Aires Cereals Exchange cut its wheat forecast by another 7.5 percent Wednesday, marking the lowest amount of area seeded with the grain since records have been kept.

 

Farmers are expected to plant just 2.96 million hectares with wheat this season, a drop of 35 percent from last year, according to the exchange.

 

In addition to the dryness, farmers are hesitant to plant the crop due to low prices because of government intervention in wheat markets. They also face high financing costs and the economic strain caused by losses to the 2008-09 soy and corn crops due to drought.

 

Farmers have harvested virtually all of the 2008-09 soy crop, according to the Secretariat. Just one percent of the planted area remains to be harvested.

 

The Secretariat hasn't forecast output, but the exchange pegs production at a dismal 32 million tonnes.

 

Early in the season, analysts had expected output to approach 50 million tonnes, but severe drought damage caused yields to plunge. Yields were the lowest in over a decade, according to the exchange.

 

Meanwhile, soy production is expected to rise sharply again next season.

 

Soy planting is likely to surge to between 19 million and 20 million hectares during the 2009-10 season, according to the exchange's top climatologist Eduardo Sierra. That would shatter the record set during the 2008-09 season, when farmers seeded 16.6 million hectares with the oilseed.

 

In addition to weather factors, the fact that soy are the only major crop in which the government doesn't control exports is spurring farmers to plant more of the oilseed. Argentina limits the export of wheat and corn to ensure domestic supply and keep down local prices.

 

"All signs point to a continued expansion in soybean area, Rodolfo Rossi, the president of the Argentine soy growers association, Acsoja, said in a recent interview.

 

As of June 18, farmers had harvested 93 percent of the area planted with corn, according to the Secretariat.

 

Production is forecast by the exchange at just 12.7 million tonnes, the smallest crop in more than a decade, due to extensive drought damage.