Argentina's corn crop has been walloped by the drought that hit the Pampas grains belt at the height of the Southern Hemisphere summer, the government said in its weekly crop report on last week.

The six weeks of dry weather that parched corn and soy fields in December and early January have resulted in yield losses of up to 40 percent in some areas, the report said. Soy has a longer flowering period, which allowed it more time to soak up moisture and avoid such extensive damage. Grains exporting powerhouse Argentina is the world's No. 2 corn exporter after the United States and its No. 1 supplier of soymeal, used as animal feed, and soyoil, used for cooking and in the booming biofuels sector.

The farm sector is a key source of government revenue at a time of increasing global economic headwinds. Not only growers and soy traders but long-term investors are evaluating Argentina's ability to help meet rising world food demand.

In key corn-growing area Bragado, Buenos Aires province, early-planted fields are being harvested with yields coming in at 2,000 to 5,000 kilos per hectare, the report said.

"As expected, the loss in corn yields is averaging about 40 percent compared with full potential yields," it added.

Nearly half of Bragado's 2011/12 corn has been collected at an average yield of 4,500 kilo per hectare.

Some early-planted corn fields in Rio Cuarto, Cordoba province, are so thin that farmers have decided not to harvest them at all. The province's late-planted corn is developing normally, "except in western Rio Cuarto, which was affected by frost 10 days ago," the report said.

The Southern Hemisphere has entered the fall season. Farmers who avoided having their corn plants parched by the December-January drought by planting later than normal now hope to collect their fields before they are damaged by any early autumn cold spells. About 5 percent of Argentina's tax revenue comes from grains exports. The country needs all the revenue it can get as its economy slows due to global sluggishness, lower demand from key trade partner Brazil and higher energy prices, which are weighing on domestic consumption.

Despite these challenges to investment in the farm sector, the world is counting on Argentina to help meet demand for food, which the United Nations expects to double as global population grows to an estimated 9 billion by 2050.

In the Buenos Aires coastal zone of Bahia Blanca, soy fields have gotten good rains, allowing crops to develop normally. The area of Bolivar, also in Buenos Aires province, rains were so heavy over the last week that collection was suspended as harvesting machines got bogged down in the moist earth.

Buenos Aires is Argentina's key producing process.

On Thursday, the Buenos Aires Grains Exchange but its 2011/12 Argentine soy crop estimate to 44.0 million tonnes, down from a previous estimate of 45.0 million. The exchange kept is corn forecast steady at 20.8 million tonnes. Grains exporters with operations in Argentina include Cargill Inc, Bunge Ltd, Molinos Rio de la Plata , Noble Group Ltd and Louis Dreyfus.

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.