February 4, 2011

Argentina's corn crop forecast cut on drought

Argentine corn farmers will harvest 19.5 million tonnes of corn this season as a drought in the world's second-largest exporter trims output to below estimates, the Buenos Aires Cereals Exchange said while CBOT Corn gained.

Yields of the grain in Argentina's core producing region, which accounts for about 35% of output, are below the average for the past 10 years because of water shortages, the exchange said in its weekly crop report. Recent rains could not compensate for a drought, and rain expected in the Pampas over the next week would also not be enough, it said.

Corn futures for March delivery added 5.75 cents, or 0.9%, to US$6.47 a bushel in CBOT on news of Argentina's reduced crop forecast, after earlier dropping as much as 2.1%. Yesterday, the grain closed down 2.8% after reaching US$6.6625, the highest since July 17, 2008.

La Nina, a weather event that forms in the Pacific Ocean and affects climates worldwide, has pared planting since November in Argentina. The US is the world's largest exporter of the grain.

Last week, the exchange forecast Argentina's corn crop at 20.4 million tonnes. About 98% of Argentina's crop has been planted, the exchange said. The corn harvest begins in February.

The exchange reiterated its forecast for soy at 47 million tonnes, with about 98% planted. The wheat crop is 98.2% harvested and will reach 15 million tonnes, the exchange said.