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Grains Weekly Analysis

By: StoneX Intelligence Brazil, StoneX Intelligence Brazil

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Size of crops in Argentina will affect world soybean and corn balances
 
João Pedro Lopes
joao.lopes@stonex.com
 
Ana Luiza Lodi
analuiza.lodi@stonex.com
DESPITE THE RECENT RAINFALL, CROP CONDITIONS ARE WORSE THAN IN PREVIOUS YEARS

For the third consecutive year, South American grain producers are witnessing the effects of the La Niña phenomenon, which usually results in scarce rainfall in the south of the continent, especially in Uruguay, southern Brazil, and Argentina. With increased uncertainty about the rainfall volume and temperatures, the grain crop development in South America has been closely monitored. The weather has already affected the Brazilian soybean and summer corn crops, but record production is still expected for both crops. Currently, the main concern falls on Argentine crops.

The grain planting is already in its final stretch in the country. According to the report released on January 26 by the Buenos Aires Grain Exchange (BCBA), 98.8% of the soybean crop had already been planted versus the 5-year average of 99.9%, while the corn crop planting reached 94% versus 96.6% average. However, for both commodities, the planting rate was considerably slower than the average, causing a good part of the crop to develop in a period not considered ideal.

Corn crop planting (%)*

image 62331
 
Sources: BCBA and StoneX. Design: StoneX. *Average, maximum-minimum refers to the period between the 17/18 and 21/22 crops

 

Soybean crop planting (%)*

image 62332
Sources: BCBA and StoneX. Design: StoneX. *Average, maximum-minimum refers to the period between the 17/18 and 21/22 crops

In addition to the planting delay, the irregularity and the lack of rainfall led Argentina's crops to adverse conditions for crop development. According to Buenos Aires Grain Exchange (BCBA), at the end of January, 12% of the country's corn crop was in good or excellent condition versus 31% in the same period of the 2021/22 crop and a 5-year average of 42%. Between 2017/18 and 2021/22, the worst condition observed for the same week was seen in 2020/21, when 22% of crops were in good/excellent condition.

 

Percentage of corn crops in good/excellent condition*

image 62333
Sources: BCBA and StoneX. Design: StoneX. *Average, maximum-minimum refers to the period between the 17/18 and 21/22 crops
 
 

As for soybean, only 7% of the country's crop was in good/excellent condition versus 36% in the same period of the 2021/22 season and the 5-year average of 39%. Between 2017/18 and 2021/22, the worst condition observed in the same week was in 2020/21, when 17% of crops were in good/excellent condition.

 

Percentage of soybean crops in good/excellent condition*

image 62005
Sources: BCBA and StoneX. Design: StoneX. *Average, maximum-minimum refers to the period between the 17/18 and 21/22 crops

Given this unfavorable scenario for Argentine grains, the USDA reduced its estimates for the soybean and corn crops in 2022/23 in its last supply and demand report. The Department cut its number for corn by 3 million tonnes to 52 million tonnes, while the oilseed was reduced by 4 million tonnes to 45.5 million.

The Rosario Exchange brought the most aggressive adjustment, with 12 million tonnes cut in soybean production for 22/23 to 37 million tonnes. The institution has not yet released its official figure for the corn crop, but according to its special report this month, 50 million tonnes could be produced in a normal scenario. However, due to the serious problems with planting and the expected production losses, the volume should be around 45 million tonnes.   

The Buenos Aires exchange also cut the soybean crop by 7 million tonnes to 41 million tonnes. In addition to the adverse impacts of the lack of rainfall in the country, BCBA reduced the soybean planted area by 500 thousand hectares to 16.2 million hectares as a result of the losses recorded due to very high temperatures and the closure of the planting window in the central belt of the country.
 

Soybean production in Argentina (million tonnes)

image 62008
Sources: BCBA and StoneX. Design: StoneX. *Estimate

Considering the planted area at 16.2 million hectares and the abandonment rate at 4.9% (last 5-crop average), a yield at 2.66 ton/ha would be necessary to produce 41 million tonnes as the Grain Exchange estimates, a number lower than the 5-year average (2.79 ton/ha), but still high considering the planting pace and crop condition were considerably below average for several weeks. In the 2017/18 crop, for example, the average yield was 2.18 ton/ha, and that season the crop conditions were in better condition than those currently brought by the Exchange. 

Corn production in Argentina (million tonnes)

image 62009
Sources: BCBA and StoneX. Design: StoneX. *Estimate

The scenario for corn is similar. The institution estimates corn production at 44.5 million tonnes. Considering acreage at 7.1 million hectares and the 5-crop average abandonment rate at 3.1%, a yield of 6.47 ton/ha would be required, a number below the last 5-crop average yield (7.44 ton/ha) but above observed in 2017/18 (6 ton/ha). Even though the country had a significant crop failure, crop conditions were better than in the current cycle, according to the BCBA.

Given this scenario, the weather in South America will remain central in the coming weeks, highlighting those concerns about Argentina remain amid forecasts of high temperatures and below-normal rainfall in productive areas of the country. Despite the recent cuts, conditions are significantly more adverse than in recent years. Therefore, there is still room for further reductions, which would accentuate the tightening in the global grain balance, which is no longer in a loose situation.
 

 
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