November 12, 2003

 

 

Argentina's Corn, Soybean, Wheat Prices All Up From week Ago

 

Argentine grain prices closed higher Thursday compared with a week ago, with corn, soybeans and wheat all up from a week ago, traders said.

 

Soybeans for immediate delivery sold for 630 pesos ($1=ARS2.86) per metric ton Thursday in Rosario, Argentina's primary soybean market.

 

This is up from 615 pesos a week earlier.

 

Prices in Argentina usually mirror those at the Chicago Board of Trade, the world's No. 1 grain exchange. This was true Thursday as local prices held firm or rose in tandem with their counterparts in Chicago.

 

Local soybean prices were relatively unaffected by this week's report by the U.S. Department of Agriculture, which forecast a one-million-metric- ton increase in Argentine soybean production for 2003-04.

 

"The USDA confirmed what the market was expecting," said a Rosario-based trader. "The report did not have much impact on prices."

 

Even so, some analysts said the USDA's estimate of local soybean output, forecast at 38 million tons, is exaggerated.

 

"This is unrealistic," said one trader. "The lack of rain has been hard on corn and wheat, but it may be hard on soybeans as well. It has already slowed planting and worsened soil conditions."

 

Virtually everyone agrees that climatic conditions are key to determining the size and quality of the 2003-04 production cycle. But it is unclear when and how much it will rain this season.

 

"If from today onward we get good rain, we could have soybean production that reaches 39 million tons, but that is a big if," said the Rosario trader.

 

As of Saturday, farmers had planted 15% of the 2003-04 soybean crop, according to the Buenos Aires Cereals Exchange. This is up seven percentage points from a week ago but down five points from a year earlier.

 

"The delay is based on problems caused by the drought in Cordoba, La Pampa and southern Santa Fe, as well as in some parts of northern provinces such as Tucuman, Salta and Chaco," the exchange said. "While it is still very possible to reach the goal of 13.7 million hectares, the prolonged dry spell in western parts of the Pampas region during the rest of the month will complicate the work of some producers."

 

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

 

CORN

 

Corn sold for 260 pesos on Thursday in Rosario, up from 245 pesos a week earlier.

 

The 2003-04 corn crop was 54% planted as of last Friday, according to the Buenos Aires Exchange.

 

Analysts have cut their forecasts for 2003-04 corn output because of the problems related to the drought.

 

Earlier this week, the USDA reduced its estimate to 14 million tons, down from 16 million a month ago. Some analysts and traders say that even this figure is too optimistic.

 

"I think they need to revise it downward even further," said Federico Mircoli. "We may be looking at around 13 million tons."

 

Some analysts have even said corn production be end up as low as 12 or 13 million tons. As was reported last week, Fundacion Producir has put total 2003-04 corn output at only 10.5 million tons.

 

The drought has prevented planting in many areas. With only a matter of days left to plant the crop under healthy conditions, more farmers have decided to replace corn with soybeans, which hold up better in bad weather.

 

The Secretariat has been expecting farmers to plant 3.15 million hectares of corn (including feed), which would lead to total production of about 15 million metric tons.

 

This would be up from 3.09 million hectares in 2002-03, when Argentina produced 12.3 million tons of corn. However, on Nov. 19 the Secretariat is expected to reduce its estimate for planted area.

 

WHEAT

 

Wheat for immediate delivery closed at 400 pesos in the southern port of Bahia Blanca, up from 380 pesos a week earlier.

 

Traders said prices have risen as local crushers compete against exporters to buy a limited supply of wheat.

 

"Demand for wheat is relatively inelastic," said a trader in Rosario. "Crushers need about 5.5 million tons of wheat each year, but this year production is down, so they are having to compete with exporters for what wheat is left and this has tended to push prices up."

 

The USDA this week cut its forecast for 2003-04 wheat production to 13 million tons, down from 13.5 million a month ago.

 

But this is far too generous, according to analyst Alejandro Ramirez. Earlier this week, he forecast 2003-04 output at just 9.9 million tons, compared with 12.3 million a year ago.

 

Others have also cut their estimates.

 

"I would say the USDA number is still too high," said Mircoli. "We could be looking at production of around 11 million tons."

 

Last year farmers planted 6.3 million hectares of wheat, according to the Secretariat. The Secretariat has estimated the 2003-04 wheat area at six million hectares. The crop was fully planted by the end of August and farmers will begin collecting it any day.

 

Futures wheat prices closed Thursday at $145 for January wheat. This is in line with the 400 pesos paid for cash wheat.

 

Unofficially, Agriculture Secretariat officials have been estimating 2003- 04 wheat production at 15 million tons. However, as with corn, the Secretariat is likely to release a reduced official estimate next week.

 

Argentina has not produced less than 12 million tons of wheat since 1995- 96, when output totaled 9.45 million tons.