NAPERVILLE — Argentina soybean and corn planting is off to an unusually slow start as farmers there face a third consecutive growing season featuring a drought-supportive La Nina.
Soybeans were only 17% planted in the top soy product exporter as of last Thursday versus last year’s relatively normal 31%. Corn at 32% complete was down sharply from 48% a year ago, and the sowing paces for both crops are the slowest in at least two decades.
Excessively dry conditions can be blamed for the delays, though some showers over the last several days may have allowed for additional fieldwork. Forecasts show chances for more rain showers next week, but very hot temperatures late this week into next may zap soils of recently acquired moisture.
Drought has already slashed Argentina’s wheat crop by nearly 40% from last year under La Nina, which occurs when surface waters in the equatorial Pacific Ocean are cooler than normal. The cycle can cause extended dry conditions for the country’s soybeans and corn, often leading to lower crop yields.
Forecasts suggest La Nina may fade into a neutral phase midway through Argentina’s growing season, but it is too early to say with certainty. Current trade wind and ocean temperatures, including those in the Indian Ocean, could support further strengthening of La Nina in the coming weeks.
But that should not necessarily heighten concerns since crop impacts are not perfectly correlated with La Nina strength. Argentina’s very worst corn and soybean yields (including in 2009 and 2018) occurred during moderately strong La Ninas, not the strongest ones. The last two seasons’ episodes were of moderate strength.
The Vegetation Health Index (VHI), a U.S. government product, shows most of Argentina’s grain belt classified well into the stressed zone. The same product shows drought coverage in key provinces such as Buenos Aires, Cordoba and Santa Fe is at, near or has recently reached the highest levels in at least a decade.
Argentina’s VHI has not looked this bad for late November since 2008 and 2009, both years with extensive drought. Rain during the 2008-09 growing season was less than two-thirds of normal, resulting in terrible crop yields, particularly for soybeans. It was also a moderate La Nina year.
The 2009-10 season started very dry, but the descent into a moderately strong El Nino saved a second consecutive crop shortfall. Growing season rains were a third heavier than usual, and soybean yields were very good, but corn was excellent.
Despite the below-normal planting pace, recent rain showers prompted Argentina’s agriculture ministry last week to up its soybean planted area estimate by 0.2 million hectares to 16.5 million, above last season’s 16.1 million.
The ministry reduced corn area by the same amount, resulting in 10.2 million hectares versus 10.6 million last year.
Argentine farmers were expected to preference soybeans over corn a little more this year due to the cost of production advantage, but they may have extra incentive based on the government’s push to raise cash through increased soybean exports.
Buenos Aires throughout September offered farmers a special exchange rate for soybeans to encourage sales and thus exports, generating $8.16 billion in cash reserves. It was rumored Friday that reinstatement of this rate is under consideration.
But that would mean the government would need to get comfortable with smaller soybean inventory, especially if the upcoming crop disappoints. The ministry pegs soy stocks for the season ended March 2023 near 4 million tonnes, half the previous year’s levels and down from 9.3 million in the season before that.
Corn stocks in February 2023 are seen at 5.4 million tonnes versus 4.1 million the prior year, based on lighter exports. Karen Braun is a market analyst for Reuters. Views expressed above are her own.
(Writing by Karen Braun Editing by Matthew Lewis)