Argentina cut its official estimates for this season's soybean and corn crops, citing bad weather, while a top grains exchange said lower-than-expected yields may force it to trim its expectations as well.
Argentina, the world's second largest exporter of corn and third largest supplier of soybeans, is set to produce 42.9 million tonnes of soy and 20.3 million tonnes of corn in this crop year, the Agriculture Ministry said on Thursday. Factoring in damage done by recent hail storms and a six-week drought that parched the Pampas in December and January, the government cut its estimates from a previous 44 million and 21.2 million tonnes respectively.
Crop estimates are important not only for Argentina, which gets tax revenue from the farm sector, but for the world, which is counting on the South American country to help meet rising food demand over the decades ahead.
Also on Thursday, the Buenos Aires Grains Exchange said that while it was holding its soy output forecast unchanged for now, there may be cuts over the weeks ahead.
"We are maintaining our national output projection at 44 million tonnes," the exchange said in it weekly crop report. "But considering that the yields being harvested in several regions of the country are not meeting expectations, it may be necessary to make another adjustment to projected volume."
Argentine farmers have brought in 37 percent of their 2011/12 soy and 39 percent of their corn, the exchange said. It expects a 20.8 million tonne corn harvest this season. Argentina is also the world's largest exporter of soymeal, used as animal feed, and soyoil, which is used for cooking and in the booming international biofuels sector.
Private estimates show about 5 percent of Argentina's tax revenue comes from grains exports. The country needs all the revenue it can get as economic growth slows due to global sluggishness, lower demand from key trade partner Brazil and import and currency controls that weigh on local production. Grains exporters with operations in Argentina include Cargill Inc, Bunge Ltd, Molinos Rio de la Plata , Noble Group Ltd and Louis Dreyfus.
DROUGHT, THEN HAIL
"The cut in projected output is due in part to the fact that some soy areas couldn't be planted due to weather conditions," the Agriculture Ministry said in its monthly crop report, referring to the drought that hit during the December and early January dog days of the Southern Hemisphere summer.
Heavy rains and hailstorms have also damaged yields over the last month, the report added. With 29 percent of this season's soybeans already collected, "yields in almost all growing areas are lower than originally expected," the report added.
The 2011/12 corn crop is now expected to come in 11.7 percent lighter than last season's harvest, according to the ministry's report. Thursday's revised soy output forecast would mark a 12.2 percent decline from the previous crop year, the ministry said. Early this month, the Rosario grains exchange cut its 2011/12 soy harvest forecast to 43.1 million tonnes from an earlier 44.5 million, saying that the downgrade better reflected the extent of drought damage.
Rosario analysts also shaved their 2011/12 corn crop forecast to 19.7 million tonnes from 19.8 million.