BUENOS AIRES: Argentina’s corn exports could slump by one-third next season, US officials warned, forecasting the potential for a slump in sowings by cash-strapped farmers, and cutting hopes for wheat output too.
While Argentina’s 2014-15 corn crop, in the latter stages of harvesting, has exceeded expectations, boosted by benign weather, prospects for next season, sowings for which will begin next month, are being undermined by farm’ finances, the US Department of Agriculture’s Buenos Aires bureau said.
“In general, the 2014-15 crop had high yields, but in most cases with negative economic returns,” the bureau said, flagging a long list of setbacks for Argentine growers, besides the lower grain prices affecting farmers worldwide.
The bureau flagged “high local inflation” which had raised production costs, “a devaluation of the local currency lagging far behind inflation, high export taxes… extremely high internal freight/transport costs” besides tightened credit and high interest rates.
“Practically all crops have negative returns,” leaving corn particularly out of favour thanks to its high need for inputs such as fertilizer, raising production costs, and government controls over exports which can leave domestic values well below international ones.
Furthermore, the transport cost for taking corn to the port of Rosario from provinces such as Salta and Tucaman in north west Argentina “is equivalent to 50% of the farmer’s net income”.
‘Great uncertainty’
The prospect in October of presidential elections in Argentina is only adding to “great uncertainty” for farmers.
“The leading candidates have expressed support to the agricultural sector, primarily removing export limitations and reducing export taxes case by case,” the bureau said in a report.
“However, in all cases it is unclear what policies will be implemented… when the new government takes office,” in December, by which time Argentine farmers will have near completed 2015-16 corn sowings.
“If policies remain unchanged, [the bureau] envisions the potential of a strong shift from corn to soybean area.”
Sowings to slump?
Indeed, if Argentina sticks with its existing policies, plantings could drop by “anywhere between 15-30%” for 2015-16, the bureau said, pencilling in itself a drop of 15% in plantings to 2.8m hectares.
Output was forecast dropping by 21% to 21.0m tonnes, and well below the 25.0m tonnes which the USDA has forecast for next season.
Exports, for the season, beginning in March next year, were pegged at a seven-year low of 11.5m tonnes, a slump of 32% year on year.
‘Using low technology’
The bureau also cut, to 10.2m tonnes, its forecast for Argentina’s 2015-16 wheat crop, for which sowings are nearly finished, and harvesting will begin late this year.
While the official USDA forecast is for an 11.5m-tonne crop, “yields could be somewhat lower than normal as most producers are reported to be using low technology, especially fertilizers, to reduce production costs”.
The El Nino, which has a history of bringing Argentina excessive spring rain, could also depress output.
Wheat exports for 2015-16, starting in December, were pegged at 5.0m tonnes, down 500,000 tonnes year on year, and 1.7m tonnes below the USDA’s official estimate.
Corn upgrade
The bureau pegged sowings at 3.7m hectares, also a little below the official USDA figure, but in line with an estimate last week from the Buenos Aires grains exchange.
The exchange raised its estimate for the 2014-15 corn harvest, pegged at 79% complete, at 26.0m tonnes.
The bureau forecast the crop at 26.5m tonnes.
