Argentina Crop Outlook - 1


By Alastair Stewart
DTN South America Correspondent

BALCARCE, Argentina (DTN) -- Argentina was well on course for a bumper soybean crop until the rain started falling in April.

Showers were incessant for most of the month across the north of the grain belt, catching the soybeans right at harvest time, when they really needed to be dry.

"The effects have been devastating. We have seen massive losses and another portion of the crop is of very poor quality," said Pablo Adreani, grains analyst at the Agripac consultancy in Buenos Aires.

The question is exactly how big has been the impact of the rains that averaged 8 to 10 inches across key soy-producing parts of Cordoba, Santa Fe and Entre Rios provinces in the month, and reached 25 inches in some areas, causing widespread flooding and waterlogging of fields.

The local exchanges and the Agriculture Ministry have so far taken a fairly conservative line on the damage. Buenos Aires Cereals Exchange two weeks ago lowered its crop forecast from 60 million metric tons to 56 mmt, based on an estimate that output had been lost on 4 million acres. The government lowered its forecast to 57 mmt.

But analysts think the damage may be somewhat greater, with numbers ranging from 50 mmt to 55 mmt.

"The area hit is very large and it is a top-yielding region," said Dante Romano, grains analyst at FYO, a grain brokerage in Rosario.

Images of mature soybean plants rotting in the fields, pods split because of humidity and damaged beans abound on Argentine twitter feeds.

Over and above the straight-out losses, the impact on quality will be significant.

Agripac's Adreani predicts that up to 5 mmt of soybeans will be delivered with substandard quality. Discounts of up to 40% on soybean deliveries due to quality issues are being regularly reported at Rosario port.

The extent to which the quality issues affect soy exports depends on how effectively farmers and exporters are able to mix that soy in. Luckily, Argentina has substantial carryover stocks of around 5 mmt, which will undoubtedly be used.

The true impact of the rains will only become clear once the soybean harvest moves forward significantly.

The good news is that rain has eased over the last 10 days and the weather charts do not have much rain for the north over the next couple of weeks.

"It appears that more normal, drier winter weather conditions are returning," said Romano.

The end of the rains has allowed harvest efforts to move forward, although they remain well behind schedule. As of May 5, the Argentine soybean crop was 41.5% harvested, back about 27 percentage points on the same stage one year before, according to the Buenos Aires Cereals Exchange.

Problems getting into the fields aren't the end of it. Many farmers have been unable to send the harvested beans to elevators because of flooded roads and are forced to store humid beans in silo bags, risking further quality issues.

This ended up starving Argentina's massive crushing industry of beans. There are two or three crushers in the Rosario region that have had to cease operations because of lack of raw materials.

Meanwhile, the line-up of vessels waiting to load grains at greater Rosario terminals has swelled to around 200 vessels and the waiting time to get a loading berth has stretched to around 20 days.

In response, exporters switched cargoes to Brazil, which was part of the reason the neighbor producer posted record monthly soybean shipments of 10.1 mmt in April.

All this is bad news for the Argentine government at a time when it was hoping for bumper revenues from the tariff of around 30% on soy shipments.

After a decade in which soybean has been dominant in Argentina, the oilseed will take the back seat to corn and wheat in 2016.

That's principally because farmers are looking to restore corn and wheat to rotations after the newly installed government of Mauricio Macri scrapped tariffs and quotas on those cereals last year. But it's also because increased resistance to glyphosate is increasing soybean planting costs.

"In our case, we are seeing soybean costs near corn costs because of the resistance," said Rodrigo Mendez, manager of El Volcan, a large farm in Balcarce, in southern Buenos Aires province.

As a result, analysts predict that soybean acreage could fall by 2.5 million acres or more next year.

According to Gustavo Lopez, grain analyst at Agritrend, planted area in 2016-17 will drop 5.5% to 47 million acres.

Alastair Stewart can be reached at