February 6, 2012


Dry weather may cut Argentina's corn exports by 30%



Drought is expected to cut 30% of Argentina's corn exports, but its wheat exports will likely be larger than anticipated.


US officials in Buenos Aires prepared the ground for a downgrade in US estimates for the Argentine corn harvest, in an influential crop report next week, by pegging production at 21.8 million tonnes.


Separately, consultancy Informa Economics on Friday (Feb 3) cut its estimate for the harvest by 1.5 million tonnes to 22.5 million tonnes, while US broker Allendale estimates the crop at 23 million tonnes.


"Extremely dry conditions and very high temperatures during December and the first half of January, coinciding with the key period of corn flowering, has diminished production drastically," the attaches said. "In most of Argentina all plantations are somehow affected, but in the central area of the country there are many plantations which were completely lost. Some producers cut them for silage, others have turned cattle out for grazing, and others have left them or sown soybeans with a significant risk."


The attaches' forecast for the corn crop, while above private estimates as low as 17 million tonnes, is in line with an emerging consensus, but substantially below the USDA's forecast last month of a 26 million-tonne harvest.


The USDA, whose grains data set the world benchmark, uses information from its in-country bureaux as a key input into its Wasde reports.


And the attaches warned that the lower output too would cost Argentina its hopes of beating last season's corn exports of 15.5 million tonnes.


Shipments for 2011-12 were pegged at 14 million tonnes, below a current USDA forecast of 18.5 million tonnes, and initial hopes for shipments of a record 20 million tonnes.


Ideas that corn buyers will be forced to turn from Argentina, the second-biggest corn exporter, to the top-ranked US for supplies have been a major prop to Chicago futures prices.


However, the attaches signalled growing competition from Argentina in wheat exports, thanks to a relaxation of strict government controls on trade.


The government is due this month to introduce a system which will, after keeping aside seven million tonnes of the grain for domestic use, allow the balance of the harvest to be exported without quotas.


"If this system is implemented and works smoothly, we anticipate a significant reduction in ending stocks," the attaches said, forecasting that inventories would end 2011-12 at 1.3 million tonnes, down more than one half year on-year.


The run down in stocks will allow wheat exports to match last season's 9.5 million tonnes despite a smaller harvest, beating by one million tonnes the USDA's official forecast.


Informa also cut its forecast for Argentina's soy crop by 4.5 million tonnes to 46.5 million tonnes, and for Brazilian soy by two million tonnes to 70 million tonnes. The Brazilian corn estimate was left unchanged at 61 million tonnes.


Allendale pegged the Argentine soy crop at 49 million tonnes, and the Brazilian one at 72 million tonnes. The Brazilian corn harvest was estimated at 60 million tonnes.

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