January 31, 2012

 

Argentina's soy may pick up after December drought

 

 

The soy crop of Argentina endured a severe drought last December but, unlike the corn crop, it is expected to get better.

 

More rainfall like the smattering that doused the pampas at the start of this week will result in a decent crop, farmers and analysts say.

 

"The fate of the soybean crop will really be decided between January 15 and February 15," said Ricardo Baccarin, a commodities analyst at the Panagricola consulting firm in Buenos Aires.

 

That's not to say the dry weather has had no impact. Two months of sparse rains have left first crop soy plants stunted with limited leaf coverage in many key-producing regions.

 

As a result, analysts no longer expect the crop to reach original predictions of 50 million to 52 million tonnes (1.8 billion to 1.9 billion bushels), or indeed to match last year's output of 49 million tonnes. At present, the local market consensus is that production will fall between 45 million tonnes and 49 million tonnes. On Thursday (Jan 26), the Buenos Aires Cereals Exchange pegged the crop at 46.2 million tonnes.

 

Walking around the La Merced farm in southern Santa Fe province, the drought's impact is apparent with soy planted back in November still around the thighs when they should be around the waist.

 

"The first soy (planted in October and November) has been through extreme stress. It is apparent when you look at the stunted, weak structure of the plants," said Marcelo Sanguineti, production director at La Sibila, which runs the 18,000-acre La Merced farm.

 

This stress will limit first crop yields to 3,200 kg per hectare (47.6 bushels per acre), about 20% down on initial expectations, he forecast.

 

Down a dusty track, Sanguineti showed me a second soy field, this time planted in mid-December after wheat. The crop looked scrawny with plants barely poking above the wheat stalks left from the previous crop. But these plants have a better chance of recovery than the earlier soy, says the farmer.

 

At least La Merced managed to plant most of their second crop soy. Many farms were forced to postpone planting because of the dry December conditions. Some of those crops were planted in January, following showers, but the delay significantly lowered the yield potential of those crops, explained Ricardo Negri, chief agronomist at the CREA farmer group.

 

"A lot of the January soybeans were planted to cover the soil until the next wheat or barley crop, rather than in the hope of making money," he said.

 

The La Nina-inspired drought has hit hardest in northern Buenos Aires, southern Santa Fe and southern Cordoba, the heart of Argentina's grain belt that boasts some of the world's best farmland. Indeed, the market would already be talking about much greater losses were it not for the nutrient-rich soil, analysts said.

 

Rainfall of 1/2 to 4 inches fell across the grain belt at the start of the week. However, the heavier showers missed the principle growing regions and much more precipitation is needed to correct the soil moisture deficit that has built up over the past year.