January 6, 2012
 

 

Argentine's bountiful soy harvest could be in danger if it does not rain this month or next, as up to a fifth of its corn crop get destroyed by the heat, Reuters reported.

 

Benchmark Chicago corn and soy prices have both rallied more than 10% in the past three weeks as a hot, dry southern hemisphere summer has roasted grain fields across Argentina's legendary Pampas farm and cattle region.

 

Argentina is the world's second-largest corn exporter and third-largest soy seller. So with rising food prices threatening to push more people around the world into poverty and hunger, global markets are watching the South American country's spotless blue horizon for signs of rain.

 

The fiscal health of Argentina's government also hinges on revenue from the country's biggest export, soy.

 

Late-season corn planting has ground to a halt in Argentina while soy farmers have started to compare this year to the nightmarish drought of 2008/09, which cost them 30% of their harvest. That year, corn growers lost 40% of their crop.

 

For corn, a crop that develops earlier in the season, the damage has largely been done. Analysts have slashed their Argentine harvest estimates. Still, they see little risk that prices will surge as much as they did in early 2011, when corn prices hit record highs above US$8 a bushel.

 

The outlook for soy, Argentina's larger and more essential crop, remains up in the air. The country exports about half of the world's soyoil, used for cooking and in the booming international biofuels sector.

 

After December rains came in less than their historical norms, farmers are praying for healthy downpours this month or next that will spare them a repeat of the disastrous 2008/09 harvest. That year, the La Nina syndrome, which tends to cause dry weather in Argentina, walloped crops before they could be collected.

 

"Everything hinges on the rains we expect in late January, February and March, which should save a great part of the soy crop," said Eduardo Sierra, climatologist at the Buenos Aires Grains Exchange.

 

Crop failures would add to fiscal and political challenges for President Cristina Fernandez. On the heels of her reelection in October, her government has been bracing for fallout from Europe's financial mess and slower demand growth from key commodities client China.

 

Weather conditions in Argentina are beginning to resemble those of the 2008/09 drought, Kansas City-based World Weather Inc. said in a report on Wednesday (Jan 4). But the report said there was still time for recovery of soy and sorghum output with sustained rains.

 

"The earliest that significant rain will fall in some of the drought-stricken areas will be early next week, but confidence is not high," it said.