June 29, 2009

Another week has passed without significant rainfall across Argentina's farm belt, causing a further deterioration in wheat planting conditions, the Agriculture Secretariat said in its weekly crop report Friday (June 26).

 

"The lack of rain keeps accentuating the moisture deficit across most of the Pampas," the Secretariat said, adding soil moisture levels are too dry to proceed with planting in many areas.

 

The Secretariat hasn't forecast area or production yet, but on Wednesday the Buenos Aires Cereals Exchange slightly trimmed its forecast for wheat area to 2.9 million hectares, down 35 percent on the year and the smallest area going to wheat in over 100 years.

 

In addition, "if there isn't a drastic change in current weather conditions, wheat area will fall even further," the exchange said.

 

As of Wednesday, just 923,000 hectares had been planted to date, down 51% from the area seeded with wheat at that point last year, the exchange said.

 

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.

 

As of June 25, 94 percent of the area seeded with corn had been harvested, the Secretariat said.

 

The exchange forecasts production of just 12.7 million tonnes, the smallest crop in over a decade, due to extensive drought damage.

 

Soy planting wrapped up last week, the Secretariat said.

 

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.