April 16, 2004

 

 

Argentina Soybean Prices End Lower After CBOT Plunge

 

Argentina's soybean prices plunged lower on Thursday after investors engaged in a massive sell-off of soybeans at the Chicago Board of Trade, traders said.

 

Soybean prices in Rosario traded for 625 pesos ($1=ARS2.82) on Thursday, down from ARS670 on Wednesday. Prices are down from a record ARS710 about three weeks ago and may decline further before rebounding, traders said.

 

"This was profit taking. This was a speculative movement (in Chicago) that pushed prices down to their limit," said Federico Mircoli of the Buenos Aires-based brokerage Granos del Parana.

 

Chicago soybean prices fell as much as 50 cents per bushel, their daily trading limit, and U.S. traders said prices might drop again early Friday.

 

As the world's primary grain exchange, CBOT values normally influence prices abroad and this was certainly the case on Thursday in Argentina.

 

"Prices are way down, but they didn't decline as much here as they did in Chicago," Mircoli said. "It could have been worse. Prospects for the long term are still good."

 

Local prices are likely to rebound over the long-term because production in South America is too weak to satisfy world demand, Mircoli and others said.

 

"We're looking at around 50 million tons in Brazil and another 30 million in Argentina," said Mircoli. Both estimates are well below early - and some current - expectations for production in Argentina and Brazil.

 

The U.S. Department of Agriculture has estimated Argentina soybean production at 35 million tons this year.

 

This estimate, which is down from 36.5 million last month, is still overly optimistic, traders and other analysts say.

 

"Yields in Argentina are very disparate," Mircoli said. "They are good in some areas and awful in others. This decline in output is another factor that will help to push prices up in the long run."

 

New 2003-04 crop soybeans for delivery in May sold for $225 in Rosario.

 

Argentina's Agriculture Secretariat last month estimated 2003-04 soybean production at 34.7 million metric tons, just under the 34.8 million produced a year ago. Production is expected to decline even though planted area stands at 14.1 million hectares, up from 12.6 million a year ago.

 

The Secretariat will release its new 2003-04 crop estimates April 21.

 

As of Saturday, farmers had collected 28% of the new soybean crop, according to the Secretariat.

 

According to the Buenos Aires Cereals Exchange, the average soybean yield last week was 2.49 tons per hectare, down from 2.98 tons a year ago at this time. This decline in productivity derives mainly from a drought that plagued farmers earlier in the campaign. It also explains why production is expected to decline from last year.

 

Argentina is the world's No. 3 soy producer, behind Brazil and the U.S.

 

Most of Argentina's soybean production is converted into meal and oil, making it the No. 1 exporter of these products.

 

CORN

 

As with soybeans, corn prices took a hammering Thursday in Chicago, reaching the 50-cent-per-bushel drop limit before recovering a bit and ending down. This drop was reflected somewhat here in Argentina, where corn sold for ARS245 on Thursday in Rosario.

 

As of Saturday, farmers had finished collecting 39% the 2003-04 corn crop, according to the Secretariat.

 

The Secretariat last month raised its estimate for 2003-04 corn output to 12.4 million metric tons, up from 12.1 million a month ago.

 

Meanwhile, the exchange sees production at 12.8 million tons.

 

Argentina produced 15 million metric tons of corn in 2002-03, according to the Secretariat.

 

The USDA has forecast 2003-04 corn production at 12.5 million tons.

 

In 2003, Argentina was the No. 3 exporter of corn, behind China and the U.S. However, Argentina is expected to recover the No. 2 spot in 2004 as China halts its corn exports.

 

Rumors were even heard this week that China might consider importing corn from Argentina at some point this year.

 

If this happens, it would be "bombshell," said the Rosario-based brokerage Roagro in an email commentary Thursday.

 

WHEAT

 

Wheat for immediate delivery sold for ARS335/ton in Rosario and ARS380 in Buenos Aires, traders said.

 

Leftover stock of 1.4 million tons from last year, as well as higher-than- expected production this year, is keeping prices down, analysts have said.

 

Last month, the Secretariat raised its forecast for 2003-04 wheat production to 14.5 million metric tons, up from last month's estimate of 14 million.

 

Last year, output totaled 12.3 million tons.

 

The Buenos Aires Exchange has estimated total production about 13.7 million tons in 2004, compared with 12.16 million tons in 2003, according to exchange data.

 

The USDA has forecast total output at 13.5 million tons in 2004.