January 17, 2012

No rain for Argentina's corn and soy


Hopes of a timely rescue by the rain for Argentina's parched corn and soy fields were dashed when local meteorologists said Monday (Jan 16) that drought will worsen this week, according to a Reuters report.

Weeks of unforgiving Southern Hemisphere summer sun have toasted grains fields in the world's No.2 corn-exporting country, killing expectations that Argentina might replenish global corn supplies depleted by a lackluster US harvest.         

"We expect some rain in the days ahead, but it will not be enough to improve soil moisture conditions," said Liliana Nunez, a forecaster at the National Meteorological Service.       

The drought prompted the Rosario grains exchange to slash its 2011/12 corn production outlook by nearly 18% to 21.4 million tonnes. Soy crops, which are planted a bit later than corn, could also be at risk if the sun does not soon give way to rain clouds, the exchange said.        

As of Monday (Jan 16), there were few signs of that happening in powerhouse grains-producing province Buenos Aires.       

"It's a very pretty day, unfortunately," said Ruben Sgalippa, who runs a 100-hectare farm in the provincial village of Moctezuma. "They say we could start to get rain on Tuesday, but so far there's not a cloud in the sky and we're not getting any breeze. It's very hot."        

The drought is expected to add to the government's fiscal challenges this year as Argentina faces fallout from Europe's debt crisis and slower demand from No.1 trade partner Brazil as well as key commodities client China. So not only farmers and grains traders but sovereign bondholders as well have been left watching the vast blue Pampas horizon for signs of rain.       

They will be probably disappointed in the days ahead.       

"Elevated temperatures combined with little rain will mean that the week ends with a moisture deficit," said Leonardo De Benedictis, a forecaster with the Clima Campo consultancy.       

"Temperatures will remain high in the centre of the grains belt this week," he added. "From early Tuesday through Thursday there is a probability of rain, but the showers will be isolated and with little accumulation of between 10 and 15 millimetres."       

Farmers say more than 100 millimetres is needed to save their corn fields and revive soy. Argentina provides about 12% of the world's soy exports. It is the top exporter of soyoil, used for cooking and in the making of biofuels.        

The heat is related to the La Nina phenomenon, an abnormal cooling of waters in the equatorial Pacific Ocean. The effect threatens to upset commodity markets from corn to coffee as dryness in Argentina and Brazil whither crops and the southern US, a top cotton-growing area, suffers its worst drought in a century.       

The USDA expects Argentina to produce 50.5 million tonnes of soy and 26 million tonnes of corn in the 2011/12 season. The country's own Agriculture Ministry has not yet published harvest projections for the season.       

Argentina's main farm area, called the Pampas, includes southern Santa Fe, northern Buenos Aires and southern Cordoba provinces. Rains last week provided some relief, but farmers say a good bit of their crop losses are irreversible.       

Growers' organisations say some farms will be driven out of business unless the government establishes an emergency fund to help at times of bad weather.       

They are also asking the government to suspend the 35% export tax that is placed on soy exports. Critics say high taxes and other interventionist measures are scarring off investment at a time when Argentina needs it to keep up with rising world food demand.
Agriculture Minister Norberto Yauhar last week promised to provide aid in a "surgical" fashion to the growers most in need.
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