February 26, 2010

Argentina soy prices ease on CBOT, bumper-crop prospects

Argentine soy prices slipped this week on expectations of a bumper soy crop coming out of Argentina this season amid easing prices at the benchmark Chicago Board of Trade.

Soy came under "pressure from two fronts, both overseas and domestic, as the harvest approaches," the Rosario exchange said. "Record production is expected, although that depends on the weather."

Spot soy traded at ARS870 (US$225.40) and 880 a metric tonne in Rosario on Thursday (Feb 25), down from ARS960 (US$244) a week earlier. May 2010 soy futures traded at US$215 a tonne, down from US$219 and US$222 a week ago.

While some are concerned that too much moisture during the harvest season may affect yields, the crop is developing well now. The Buenos Aires Exchange forecasts for 2009-10 soy production of 52 million tonnes but said Thursday that the crop has the potential to be even bigger.

A letup in rainfall over the following days will give farmers a chance to get into the fields to treat the crops and "if a dry period comes at the end of March or early April, there is a possibility of seeing even more soy than currently estimated," the exchange said.

Some analysts see Argentina producing more than 55 million tonnes of soy this season, up 72% from last year's drought-battered crop and more than 13% higher than the previous record for soy output.

Meanwhile, corn prices got a boost this week as the government picked up the pace on issuing export permits. March-April corn contracts traded at US$115 a tonne in Rosario Thursday, up from US$108 and US$112 a week ago.

Spot corn was not traded Thursday.

Last week, the Agriculture Ministry said it will allow 10 million tonnes of corn to be exported this year. Argentina tightly regulates corn and wheat exports, allowing shipments only after sufficient supplies are set aside for domestic supply.

Excellent growing conditions have boosted the corn crop, with total output likely to be significantly higher than early expectations.

On Thursday, the Buenos Aires Cereals Exchange increased its forecast for the 2009-10 corn crop, pegging output at 20.2 million tonnes compared to the 19.3 million tonnes it forecast last week.

Steady showers over the past week helped improve conditions. In addition, sunny skies forecast for the next few days will help speed up drying of the grains and prepare the early corn for harvest, the exchange said.

Wheat trade remained stalled as farmers wait for buyers to come out with the higher prices agreed to with the government.