May 22, 2009

Argentine soy prices moved higher again this week on solid local demand and rising prices at the Chicago Board of Trade.

 

Buyers came out early on Thursday (May 21) with higher offers, according to the Rosario Grain Exchange.

 

Spot soy were traded at between ARS1,000 and ARS1,030 (US$268 to US$276) per tonne Thursday, up from ARS1,000 a week ago.

 

Soy futures weren't traded in Rosario on Thursday.

 

Local and international soy prices have continued to find support as the extent of drought damage to Argentina's crop becomes clearer.

 

Argentina's 2008-09 soy production will total just 30.5 million tonnes, the Argentine Rural Confederation, or CRA, said in a press release Tuesday (May 19).

 

CRA's forecast is significantly lower than the 32.8 million tonnes forecast by the Buenos Aires Cereal's exchange and early expectations for a 50 million-tonne crop.

 

Total grain output is expected to fall 35 percent on the year due to "the effect of bad government policies regarding exports and subsidies which have distorted the process of price formation and the adverse weather," CRA said.

 

Over 90 percent of the soy crop has been harvested to date, according to the exchange.

 

Spot wheat traded for ARS559 per tonne on Thursday, up from ARS555 a week ago.

 

Earlier this month, President Cristina Fernandez announced a deal under which exporters agreed to buy one million tonnes of old-crop wheat at full price, which is the theoretical free alongside ship, or FAS, price minus the 23 percent export tax. Exporters will then have to sell that wheat back to local millers at market price. In exchange, the exporters will be guaranteed one million tonnes of 2009-10 wheat available for export.

 

Local prices jumped 20 percent, as buyers stepped back in to the long-dormant wheat market.

 

The plan is designed to stimulate more wheat planting in the face of signs that 2009-10 production will be down sharply.

 

With planting just starting, conditions remain poor. Dry weather and tight credit are seen causing a sharp decline in area.

 

Argentina's 2009-10 wheat planting is expected to fall 18.6 percent on the year to 3.7 million hectares, the lowest amount since planting records have been kept in the country, according to the Buenos Aires Cereals Exchange.

 

In addition, climate models predict a dry fall and winter, with temperatures above average.

 

Very little new-crop wheat is likely to be available for export from the 2009-10 crop, as the government will only authorize exports once about seven million tonnes are set aside for domestic consumption.

 

Exporters bought spot corn for ARS360 per ton Thursday, unchanged from a week ago.

                      

US$1 = ARS3.68360 (May 22)