January 28, 2004

Argentina Soybean Production May Fall 5%

Argentina's soybean production may suffer a 5% fall should the current dry and hot weather conditions persist for another three weeks, said Eduardo Achaval, president of grain brokerage Granos del Parana SA.

"With this kind of heat, soybeans either get water soon or the crop will hurt," Achaval in an interview said. "If in 20 days we still don't see decent rainfall, we will be lowering the crop size by about 1.5 million tons."

Soybean futures fell 12 cents to $8.355, or 1.4 percent, in Chicago, after reaching a 6 1/2-year high on concern that heat is damaging plants in the world's third-largest producer. Futures have risen 64 percent since the end of July.

In Argentina's Buenos Aires province, temperatures rose to 37 Celsius (98.6 Fahrenheit) and meteorologists say above-average temperatures will continue for the next five days. The agriculture secretary expects a 36 million ton crop this year.

Argentina has become dependent on soybeans after a record $95 billion default in late 2001 caused its currency to tumble. Argentine soybean exports have allowed the currency to stabilize after a 70 percent drop in 2002 and are allowing the government to post a budget surplus. Argentina has a 22 percent tax on soybean exports.