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November 10, 2008

  

Argentina's wheat area, production lowered
                   

 

The US Department of Agriculture lowered Argentina's wheat harvested area estimate to 4.3 million hectares and production to 12 million tonnes (MT) for 2008/2009, based on weather conditions and export policies.

 

A reduced harvested area and lower yields together are the cause of this drastic drop in production from the previous year.

 

Total wheat harvested area is forecast to drop to 4.3 million hectares. Intended planted area fell because of lack of moisture and farmers' uncertainties about domestic prices. Farmers expect that in 2008/2009 the Argentine Government (GOA) will continue to restrict wheat exports to guarantee domestic supplies and that is expected to have a significant impact on domestic prices.

 

Unfavourable climatic events including a long-lasting drought that affected nearly 75 percent of the wheat area, and a series of severe frosts that hit the poorly established plantations, determined that around six percent of the planted fields in a vast area will not reach harvest. In central northern and western Buenos Aires and Entre Rios provinces, it is estimated that 300,000 hectares will not be harvested to allow soy to be planted in November 2008.

 

Post forecasts a decrease in the overall wheat yields to 2.79 million tonnes per hectare. Yields in the central northern area will likely only reach 2.0 - 2.5 million tonnes per hectare due to dry conditions. However, in the main wheat area, southeast of the province of Buenos Aires, lack of rain has not been a problem and all the fields look good, giving no reason to speculate that yields will be lower than their potential. Post forecasts that average yields in this area will be close to 4.0 tonnes per hectare.

 

On October 8, 2008 the National Office of Agricultural Trade Control (ONCCA) published in the Federal Register Resolution 4786/08, which allows exporters to request export licenses (ROE) for 1,763,063 million tonnes of wheat to be exported to any market in the world. According to ONCCA, wheat exports in 2007/2008 will be at 11 million tonnes. Based on the information available, post estimates total wheat exports for 2007/2008 at 10 million tonnes. 2008/2009 exports are forecast to decrease to 7 million tonnes due to lower production. Domestic consumption of wheat is estimated at 5.48 million tonnes.

 

On the other hand, total corn production in 2008/2009 is expected to drop to 18 million tonnes due to a decrease in harvested area.

 

Post is lowering the 2008/2009 harvested area of corn to 2.5 million hectares. The main cause for the reduction has been the higher production cost compared with the previous season and relative to alternative crops such as soy. Also, uncertainty about prices in 2009, due to the potential suspensions of the export registration process, has also been a key factor in farmers deciding to plant alternative corps such as soy and sorghum, both crops with lower domestic demand than corn. Planting seed companies have reported that 25 per cent of their purchasing orders for corn hybrids have been turned back in the last month.

 

Weekly rains since early October have supplied the soil of all the corn planting area with enough moisture to ensure a normal establishment of the crop. Although fertilizer (urea) price has skyrocketed to nearly US$1000 per tonne, those who have made the decision to plant corn will use that technology to assure the potential yield of the hybrid. Post forecasts average corn yields at 7.2 million tonnes per hectare.

 

Corn domestic consumption in 2008/2009 is forecast to reach to 7.5 million tonnes while domestic consumption for 2007/2008 is estimated at 7 million tonnes.

 

Exports are expected to drop 30 percent from the previous year, reaching 10.5 million MT in 2008/2009 due to less production and more pressure to control the stock balance by the GOA.

 

On October 20, 2008, ONCCA's president announced that his agency will accept export permit licenses (ROE) due to the fact that the Argentine corn stock was larger than the needs for domestic consumption. The announcement established current corn stocks at 4,322,773 tonnes which, when added to the 2,061,633 tonnes already used between January and October 2008, would sum up to 6,384,406 tonnes. According to ONCCA, the Argentine domestic consumption is 6.1 million tonnes. ONCCA states that 227,525 tonnes of corn will be the surplus allowed for export. Post estimates total corn exports for 2007/2008 at 15 million tonnes.
                      

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