May 14, 2004

 

 

Argentina's Corn, Soy Prices Down From Week Ago; Wheat Unchanged

 

Argentine corn and soybean prices have taken a beating over the past week, with both ending lower on Thursday compared with prices from a week ago. The price of local wheat, which is less affected by the ups and downs at the Chicago Board of Trade, was unchanged.

 

Soybeans in Rosario, Argentina's main cash soybean market, cost 650 pesos ($1=ARS2.923) per metric ton on Thursday, down from ARS675 a week ago. Yet prices were up from just ARS630 on Wednesday after a host of factors combined to push prices lower in trading that day.

 

Perhaps 2,000 tons of soybeans were sold in Rosario on Thursday, traders estimated.

 

"This has been a very volatile week," said Federico Mircoli of the Buenos Aires-based broker Granos del Parana.

 

A strengthening dollar, a possible interest-rate increase in the U.S., a decision by China to reject two shipments of Brazilian soybeans, and positive climatic conditions for U.S. were among the factors that helped push prices lower this week, traders said.

 

"With the possibility - probability - of higher interest rates in the U.S., you're going to see people lose interest in riskier markets," Mircoli said, explaining why some investors might have sold soybeans this week to move into other markets.

 

"The commodities market is very risky," he said.

 

Meanwhile, the expansion of the U.S. economy and the possibility of higher interest rates there helped push up the value of the dollar this week.Because the value of many commodities-particularly that of soybeans-is based on the dollar, any increase in the greenback's worth can make these commodities more expensive and thus less attractive to foreign buyers.

 

Moreover, some investors likely moved from soybeans and corn to other commodities such as oil, which is trading at its highest value since 1990, traders said. Yet higher oil prices also mean higher transportation costs for grains and oilseeds, which can make buying them even less attractive as an investment option.

 

When all of these factors come together, the commodities market becomes unpredictable, traders said.

 

"I think the volatility will be around for quite a while," Mircoli said.

 

Even so, Mircoli believes soybean prices, at least those for the rest of the 2003-04 crop, will remain relatively firm because of strong demand.

 

"There values are not going to drop below $200 (per ton) in Argentina," Mircoli said.

 

On Wednesday, the U.S. Department of Agriculture reduced its estimate for local soybean output this year to 34 million tons. But this figure is still too optimistic, according to virtually all traders and analysts here.

 

Last week, the Buenos Aires Cereals Exchange cut its forecast for 2003-04 soybean production to 32.5 million metric tons, and the Agriculture Secretariat sees production at 33 million tons. Both forecasts are a bit on the sunny side, according to Mircoli - and others - who see the final at tally somewhere between 30-31 million.

 

In any case, output will drop 34.8 million tons a year ago, according to the Secretariat.

 

As of Friday, farmers had collected 62% of the 2003-04 soybean crop, according to the Secretariat.

 

CORN

 

Cash corn sold for ARS260 Thursday in Rosario, down from ARS270 a week ago.

 

Probably not more than 4,000 tons of corn were sold Thursday in Rosario, traders estimated.

 

Market participants were "scarcely inspired" to trade corn because of disappointing weekly sales data, which kept prices "tranquil," the Rosario- based brokerage Roagro said in an email commentary Thursday.

 

As of Friday, farmers had finished collecting 55% of the 2003-04 corn crop by Friday, the Secretariat reported.

 

The Secretariat estimates 2003-04 corn output at 12.4 million metric tons, and the Buenos Arise 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.

 

WHEAT

 

Finally, wheat for immediate delivery sold for ARS360/ton in Rosario, unchanged from the past two weeks. Only about 1,000 tons of wheat were sold Thursday in Rosario, similar to a week ago.

 

In Buenos Aires, cash wheat sold for about ARS380 on Thursday.

 

The Secretariat has forecast 2003-04 wheat production at 14.5 million tons.

 

Last year, the harvest totaled 12.3 million tons.

 

The Buenos Aires Exchange has estimated total production at 13.7 million tons in 2004, compared with 12.16 million tons in 2003.

 

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