Argentina set for record soy crop as rains may end drought

Argentina may produce a record 50 million tonnes of soy in the next harvest as rains forecast for the next three months break the worst drought in a century.

Downpours created by El Nino, a weather system that forms in the Pacific Ocean and influences climates worldwide, will sweep across eastern agricultural areas this week and spread over most Argentine farmlands by November, said Eduardo Sierra, a climatologist at the Buenos Aires Cereals Exchange.

A record crop from the world's third largest producer would help ease a global shortage of soy, said Anne Frick, senior oilseed analyst for Prudential Bache Commodities LLC in New York. The Argentine harvest slumped by almost a third this year to the lowest since 2004 as lack of moisture damaged plants.

The driest weather in a century devastated Argentina's most recent soy, corn and wheat harvests and caused planting for this year's wheat to fall to a record low.

Argentina's soy output peaked at 47.5 million tonnes in the 2006-2007 season before dropping to 46.2 million tonnes the following year, the exchange said. The 2008-2009 harvest, which was gathered between February and June, was cut by the drought to 32 million tonnes.

The most-active soy future contract rose 2.5 percent this year on record Chinese demand for the oilseed and on concern this year's US crop may be damaged by an early freeze. By comparison corn futures declined 20 percent and wheat fell 19 percent.

Argentina exports more than 95 percent of its soy in the form of unprocessed grains, meal for animal food, edible oil and biofuel.

Farmers are likely to increase soy planting at the expense of corn, which is more expensive to produce, said Hugo Biolcati, President of the Argentine Rural Society, the country's largest farm group.

Though the area planted to soy will probably rise, yields may be less than normal because lower income from drought-hit harvests have left growers short of cash to buy fertilisers, insecticides and machinery, Biolcati said.