October 8, 2007

USDA: Argentina 2007/08 soy acreage to rise further

Argentina's soy acreage is seen to increase by 5 percent and a 10 percent increase in area planted to sunflower for the 2007/08 crop year due to favourable price incentives, according to a US Department of Agriculture attache report posted Friday (October 5) on the Foreign Agricultural Services Web site.

Soy planting has not yet started for the 2007/08 campaign, but early indications are that planted area will increase by more than 5 percent over the previous year's crop. Post forecasts that planted area will reach 17 million hectares for the 2007/08 crop year. Assuming that yields will be closer to the long-term average than last year's crop, Post estimates that production for the 2007/08 campaign will reach 47 million tonnes-- less than a 0.5 percent decrease from last year. Yields for the 2006/07 campaign were very high due to exceptional weather during the growing period.

Although there were earlier concerns about Argentina's energy shortage negatively affecting the country's crush capacity (some estimates indicate that total crush was down by around 10-15 percent in July), normal levels were recuperated in August. It is unlikely that total crush for the 2006/07 marketing year will be negatively affected by more than 1 percent overall due to the energy crisis.

On the other hand, sunflower planting is currently underway and has reached 10 percent of the Ministry of Agriculture's projected 2.75 million hectares for 2007/08. Post forecasts, however that 2007/08 planted area will surpass that of the previous campaign by 10 percent, reaching 4.5 million hectares, mainly due to high world demand for vegetable oils and favourable prices for sunflowerseed oil -- combined with relatively low costs of production for the crop -- which have given incentives for farmers to increase production. Post forecasts total production to reach 4.5 million tonnes in 2007/08, an increase of 25 percent over the Ministry of Agriculture's estimated 3.6 million tonnes for the 2006/07 campaign.

The increase in planted area is being facilitated by increases in southwest Buenos Aires and La Pampa, as well as some recovery of lands previously used for sunflower production in the "humid Pampas" provinces. Part of the increase will also come from marginal lands not currently utilized for agricultural production. The largest percentage increases in planted area are expected in Entre Rios, Santa Fe, and Buenos Aires province.

Humidity levels are also a highly significant variable in Argentine farmers' planting decisions for sunflowerseed. As such, recent rains in parts of Santa Fe, Entre Rios, and Santiago del Estero have also had added to the strong expectations of increased planted area in 2007/08, as well as a preliminary indication for strong yields. Although there was a lack of moisture in the Chaco region during the normal planting window, farmers reportedly did not significantly reduce plantings; and there are indications that, due to price incentives, farmers continued to plant beyond the optimal planting period in that region.

Sunflower yields have been somewhat stagnant in the recent past due, in part, to shifting of sunflower seed production onto more marginal lands, favouring soy on lands typically utilised for sunflowers. There is some indication, however, that improved genetics and increased utilization of moisture and nitrogen analyses, as well as increased use of fungicides that lengthen life of the plant -- thereby increasing yield and oil content -- have helped offset losses from planting on less productive lands. Due to expected high prices for the next few years, there will likely be some recovery of lands traditionally used for sunflower production, which should push yields upward.