Drought to keep punishing corn, soy
Argentine corn and soy farms will suffer from hot weather and scant rains for the rest of this week, forecasters said yesterday, increasing worries that crop losses will eat into global supplies.
Argentina, which supplies about 20 percent of the world’s corn exports and 12 percent of its soybeans, has been pounded for weeks by an unrelenting Southern Hemisphere summer sun.
A cold front is forecast to bring storms to the country’s grain belt on Sunday, but the moisture is expected to be unevenly distributed. The heat caused analysts to cut their crop estimates, which drove soybean and corn prices higher on the Chicago Board of Trade yesterday.
“There will be no substantial rains in the nucleus of the grains belt at least until Sunday, when we expect a cold front that will bring showers and storms,” said meteorologist Ezequiel Marcuzzi of the Clima Campo consultancy.
“But even then there will be a great disparity in the distribution of rainfall, from one field to the next,” Marcuzzi said. “One can get 50 millimeters while the field next to it only gets 15 millimeters.”
Farmers say they need more than 100 mm of rain in order to revive their fields. Hope has meanwhile faded that Argentina might be able to replenish global corn supplies depleted by a lackluster U.S. harvest.
Hamburg-based oilseeds analysts Oil World cut its forecasts of soybean crops in Argentina and Brazil by a combined 3.8 million tonnes, which could help raise demand for US soy on global markets.
Paraguay, the world’s fourth-biggest soybean exporter, declared an emergency yesterday, allowing the government to give special drought relief to farmers for a period of 90 days.
In Córdoba, Argentina’s No. 2 soy- and corn-producing province, a drought emergency was declared along with a handful of districts in other grains-producing areas. Argentina’s main farm zone, called the Pampas, includes southern Santa Fe, northern Buenos Aires and southern Córdoba provinces.
The US Department of Agriculture expects Argentina to produce 50.5 million tonnes of soy and 26 million tonnes of corn in the 2011/12 season.
The Argentine Agriculture Ministry has not yet published harvest projections while the drought prompted the Rosario grains exchange to slash its 2011/12 corn production outlook by nearly 18 percent to 21.4 million tonnes. The season started with expectations that corn would come in well above its record 2010/11 harvest of 23 million tonnes.
Soybeans, which are more resilient than corn thanks to a longer flowering period that gives plants more time to soak up whatever moisture is available, have begun to suffer as well.
The heat wave is related to the La Niña phenomenon, an abnormal cooling of waters in the equatorial Pacific Ocean that threatens to upset commodity markets from corn to coffee.
“The weather has been very difficult to predict,” said Luis Alberto Porzio, president of Buenos Aires-based soy and corn exporting company Viejo Roble. “The rains are marginal as well as inconsistent.”
The drought is expected to add to the government’s fiscal challenges this year as Argentina faces fallout from Europe’s debt crisis and a sluggish world economy.
President Cristina Fernández, who won re-election last year, is criticized by farmers for heavy-handed policies such as the 35-percent export tax her government places on soybeans.
Export taxes account for 10 percent of Argentina’s total tax collection and about half of export tax revenues come from soy and related products, said Ignacio Labaqui, an analyst with New York-based Medley Global Advisors.
“As a consequence of the drought, the estimate of the 2011/12 soybeans harvest has been lowered by four to seven million tonnes. In the case of corn, analysts expect a 20 percent fall,” Labaqui added. “This means the drought will cost about US$1.5 billion to US$1.8 billion in lost tax revenues.”