November 5, 2009

A lack of rainfall is beginning to erode Argentina's soy prospects for a second season, with analysts at Oil World citing unfavourably dry conditions for a 2-million-tonne cut to their harvest forecasts.

Some important growing regions had a fraction of their normal rainfall last month, with Santa Fe receiving half its average rain, Cordoba getting 31 percent and La Pampa in central Argentina recording only 16 percent of what it had expected.

Dry weather, along with a switch to soy to cash in on a buoyant market, has already been blamed for a drop in wheat sowings to their lowest for a century.

Expectations are being further dented by the low quality of seed, a reflection in part of last season's drought, which cut Argentine soy production by a third.

Despite the seed concerns, Argentine farmers are believed to have raised plantings by 7 percent to 19 million hectares, according to the Buenos Aires Grain Exchange.

Oil World's revised forecast of a 50-million-tonne crop would still put Argentina on course for a record harvest in 2009-10, beating the previous record of 47.2 million tonnes set in 2006-07.

However, it is lower than many other forecasts, including those from the US Department of Agriculture, which has pegged the crop at 52.5m tonnes.

South American harvests are being keenly watched in Chicago, where the prospect of large Argentine and Brazilian supplies coming on line early in 2010 viewed as a big threat to prices, which remain above US$10 a bushel.

Oil World has pegged Brazil's crop at 63.0 million tonnes, up 5.4 million tonnes year on year.

Celeres, the Brazilian farm consultancy which has estimated the crop at 64.6 million tonnes, said in a report on Tuesday that farmers had completed 35 percent of plantings, compared with an average of 21 percent by early November.