By Peter McMeekin
This season’s winter crop harvest in Argentina is progressing well amid a dry weather forecast for most of the next two weeks and extremely positive harvest reports. Yields in the north were well below average, but as the harvest has moved south, yields have improved to such an extent that wheat output looks set to smash the previous production annual record.
Heavy rains last week delayed the wheat harvest in some regions, but according to the Buenos Aires Grain Exchange, as of December 15 farmers had reaped 65 per cent of the 6.6 million hectares planted to wheat this year. This was an 11.6 percentage point advance on the previous week but still sits 1.4 percentage points behind the same time last year.
The BAGE wheat ratings took a spectacular jump last week to 81 per cent good-to-excellent, up from 67 per cent a week earlier. This was on the back of yields approaching historical highs in the country’s central cropping regions. The average wheat yield harvest-to-date sits at 31.4 quintals per hectare (qq/ha) or 3.14 metric tonne per hectare but output exceeding 45qq/ha (4.5MT/ha) in recent weeks suggest an upward revision of BAGE’s 21 million metric tonne wheat production forecast is imminent.
The Rosario Grain Exchange has already increased its wheat production forecast, moving up 1.4MMT to a record 22.1MMT earlier in the month. This is up 30 per cent from the 17MMT harvested in 2020/21. The current USDA wheat production forecast for Argentina is 20MMT, which surprisingly remained unchanged in the World Agricultural Supply and Demand Estimates released on December 9.
On the barley front, harvest has been delayed by persistent rains, and progress sits 18 percentage points behind the same week in 2020. Like wheat, yields have surprised to the upside once the harvest moved out of the drought-ravaged northern cropping areas. While the average yield is expected to be lower than last year, a higher planted area sees BAGE forecasting a 4.6MMT barley crop, with a strong upward bias.
Argentina’s huge summer crop planting program is well advanced. According to last Thursday’s BAGE crop update, 47.7 per cent of the intended corn area has been planted up to December 15, against 55 per cent in the same week last year. The corn crop is generally planted in two phases with a break in November, so the crop avoids flowering in the peak of summer. Around 64 per cent of the early crop was planted before the break, but only 32.9 per cent of the late crop had been planted by mid-December, well behind last year’s pace of 47 per cent.
The delayed planting raises production concerns as it places greater emphasis on rainfall in the January to March period in a season where La Niña is building. There is concern that the summer rains may not return until mid to late March, which would be disastrous for production and export income for the world's second-biggest corn exporter. That said, BAGE only lowered the corn ratings two percentage points to 83 per cent good-to-excellent and left its production estimate unchanged at a record 57MMT off 7.3 million hectares. The current USDA forecast is 54.5MMT.
Planting of the soybean crop is progressing well, with 64.7 per cent completed up to Wednesday of last week, but it still lags last year’s pace of 67.8 per cent. The crop is rated 87 per cent good-to-excellent, up from 75 per cent a week earlier and close to double the 48 per cent rating in the same week last year.
At this point in the season, 90 per cent of the crop has an optimal soil moisture profile, down two percentage points week-on-week but significantly better than the 65 per cent recorded on December 15 last year. While the soybean crop is more advanced than corn, its sensitivity to a prolonged La Niña event is just as significant. BAGE may have left its production estimate unchanged in last week’s update at 44MMT, but the downside risk is growing with every week of planting delays and below-average rainfall. The latest USDA production forecast is 49.5MMT.
Meanwhile, on Friday of last week, the Argentine government announced a cap on the volume of corn and wheat exports in the 2021/22 export year in a fresh bid by the Peronist government to head off domestic grain shortages and quell extremely high food inflation.
At this early stage, corn exports will be limited to 41.6MMT, while wheat exports will be restricted to 12.5MMT. However, these numbers seem quite conservative considering a record wheat crop is currently being harvested, and a record corn crop is in the making, La Niña permitting.
Last season’s registered exports were 39.8MMT and 11.2MMT for corn and wheat, respectively, from national production of 52.5MMT and 17MMT. As of December 15, grain exporters had registered 15.5MMT of corn and 9.1MMT of wheat for shipment in the 2021/22 marketing year.
The agricultural sector is the engine room of Argentina’s economy and is the key source of badly needed foreign exchange reserves, especially United States dollars. Last week’s statement by President Alberto Fernández comes just one week after the government announced the relaxation of extremely controversial limits on beef exports, imposed earlier in 2021. This latest measure will certainly not be welcomed and adds to the tense relationship Argentine farmers share with the Fernandez administration since being elected in late 2019.
While government intervention in grain and beef markets is common in Argentina and may work in the short term, history shows that such restrictions imposed over a longer period tend to discourage production, leading to domestic supply shortages and higher prices for agricultural produce.
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