September 9, 2013
Argentine farmers may plant soy instead of corn due to dry weather
Argentine farmers may not sow corn this year due to dry weather, high financing costs, tumbling Chicago corn futures prices and crop price distortions caused by government export curbs.
Argentina got its first big corn cargo into China last month, establishing the South American country as a competitor for a booming market long dominated by the US. But with dry weather causing concern on Argentina''s vast Pampas farm belt, where wheat was recently planted and corn is set go into the ground at mid-month, growers face a choice.
Forecasters say the corn belt in Buenos Aires, Cordoba and Santa Fe provinces should get moderate showers this weekend before normal rain patterns start forming toward the end of the month. Most of the area got no rain at all in August and the parts that did got 50% less than in August 2012.
Rains over the days ahead could prompt some corn sowing, but soy has the advantage as farmers weigh which crop to grow. It is less sensitive to weather, cheaper to seed and cultivate and exempt from the export curbs that are put on corn and wheat.
Inflation and financing costs have risen under President Cristina Fernandez, who was re-elected in 2011 on promises of increasing government''s role in Latin America''s no. three economy.
The president used curbs on the export of wheat and corn export to ensure ample food supplies at home. Farmers say the curbs, which can be raised and lowered through the year, make crop planning impossible and kill profits by cutting competition among buyers.
International prices have also strengthened the case for planting soy. Chicago corn futures prices are down 30% so far this year while soy futures are flat since January.
US farmers are starting to harvest what is widely forecast to be the largest ever corn crop for the world''s top producer and exporter, suggesting prices could remain low. US soy prices have been rising as recent dry weather sapped production potential and threatened to keep US stocks of the oilseed uncomfortably tight for another year.
These are some reasons why soy is favoured by Argentine farmers this season despite the risk that growing too much of the oilseed reduces crop rotation needed to keep soils fresh.
The upcoming soy crop could break Argentina''s production record of 52.7 million tonnes set in 2009-10. The country is expected to harvest a record 27 million tonnes of corn in the upcoming 2013-14 season, up from 26.5 million tonnes in the previous crop year, according to the USDA. But dryness-related planting delays could put corn harvest projections under pressure. To get maximum yields, Argentine corn should be planted between September 15 and October 15.
Argentine farmers expect China to soon approve their one remaining variety of genetically modified corn yet to be certified for import by the commodities-hungry Asian country. The South American grains powerhouse wants to push quickly into the Chinese market while its neighbour and fellow corn exporter Brazil is stuck on the sidelines, waiting for Beijing to approve its genetically modified corn.