Apr. 13, 2018
Drought conditions in Argentina are putting severe stress on corn and soybean crops, which are in the critical development stages.
"We saw a high variability on the aspects of the crops associated with rain distribution, plots management, soil quality and previous crops," said Ignacio Greco, broker and agronomist at Mercoplate S.A., a brokerage company in Buenos Aires. "It is not easy to generalize the crop conditions and hard to estimate the final yield so far."
When DTN talked to Greco, he had just completed a two-week crop tour in the main production region of Argentina.
Recent dry weather in Argentina has had a clear impact on both first- and second-crop soybeans, but in different ways. Early planted crops have developed to the later stage and were less affected as, in most of the cases, these crops started with good soil moisture conditions. Second-crop soybeans, on the other hand, are in the critical development stage, and more soil moisture is badly needed for these crops.
"It was difficult to find plots in excellent condition, and you can notice that the crops are underdeveloped if you compare them with last year's crop in the same area," said Greco. "Late-planted soybeans are in the most complicated situation, as they were planted with practically no water reserves."
In some areas where soybeans were planted after a good wheat harvest, the wheat crop had consumed most of the soil moisture. Less moisture was added later on, as rains were significantly below historical averages after soybeans were planted in December, January and February, added Greco.
The newly published weekly report from The Buenos Aires Grain Exchange (BAGE) cut its estimate of Argentina soybean production to 44 million metric tons (1.62 billion bushels), down 3 mmt (110.2 million bushels) from its estimate last week. The report also estimated 52% of the crop is under drought. "Fifty-eight percent of the area is at a critical stage for yield definition under adverse conditions and without chances of recovery for the most developed plots," stated the report, which was released March 1. "Short-term weather forecasts do not project rainfalls."
USDA estimated Argentina soybean production at 54 mmt (1.98 bb) in its last WASDE report in February.
"Thursday's report from the Buenos Aires Grain Exchange confirms what the soybean and soybean meal markets are already trading, which is significant soybean crop loss is expected to be taking place in Argentina, possibly as much as a 500-million-bushel decline from last year," said DTN Analyst Todd Hultman.
"While a specific harvest size is still too difficult to estimate, this unexpected bullish development in soybeans has driven spot meal prices to their highest levels in over a year and a half and pressured the short side of the market with significant liquidation. For now, the event is keeping trends in soybeans and meal up until proven otherwise," Hultman said.
Some analysts say that corn conditions are relatively better compared to soybeans, but keep in mind that most late-planted corn is entering the flowering stage under the current stressful weather conditions.
BAGE did not change its estimate of corn production this week, keeping output at 37 mmt (1.36 bb), though that is 2 mmt (73.5 mb) lower than last year's production. The corn harvest has started at the center of the agricultural area in the provinces of Cordoba, Santa Fe and Buenos Aires, and now stands at 3.2% complete.
"Early corn, in general, is almost done and getting dry quite fast due to weather conditions. Late corn is showing clear signs of stress (in the form) of slower development and leaf rolling," said Greco.
"The forecast is not showing signs of improvement soon. I believe BAGE will cut the corn production estimate in its report next week. In my view, there is no reason why you cut soybean production and keep corn untouched," Greco added.