Rosario exchange curbs hopes for Argentine corn sowing surge

16.09.2016

The Rosario grains exchange curbed expectations over the surge in Argentine corn to be planted in the soon-to-start sowing season, even as talk of rowing back on a tax concession cuts the appeal of rival crop soybeans.

The exchange forecast at 5.7m hectares Argentina's corn seedings for the 2016-17 harvest – an 18% surge year on year, but below the figures being talked about by other commentators.

The International Grains Council forecast a rise of "around 20%" in corn plantings, "because of potentially high returns and with farmers keen to include more maize into annual rotations".

The US Department of Agriculture has forecast a jump of 28% in commercial corn sowings, while at Soybean and Corn Advisor, influential analyst Michael Cordonnier has forecast a 25% rise on the same basis.

'Rains not so favourable'

The Rosario exchange's – relatively - weak forecast for corn plantings translated in a bottom-of-the-range estimate for 2016-17 production too, pegged at 33m-35m tonnes.

The International Grains Council has pegged Argentine output in 2016-17 at 39.2m tonnes, and the USDA at 36.5m tonnes, while Dr Cordonnier said that the crop "is estimated at 35m tonnes, compared to the 27m tonnes produced in 2015-16" on his data.

The exchange said that its forecast reflected an assumption that "rains are not so favourable for the crop as last year", implying a reduction to 7.4 tonnes per hectare, from 7.6 tonnes per hectare, in the central yield estimate.

Corn vs soybeans

The increased popularity of corn in Argentina is being driven largely by the impact of reforms, including ditching grain export controls and cutting export levies, introduced by the government of Mauricio Macri since he was elected president last year.

The previous regime – which allowed uncontrolled shipments of soybeans, albeit at an elevated tax rate of 35% - was seen as encouraging farmers to grow the oilseed, even to the extent that this prevented optimal crop rotation.

The increase in corn sowings is seen as coming largely at the expense of soybean sowing, which Dr Cordonnier has forecast dropping by some 3% for 2016-17 to 19.4m hectares.

Export tax talk

In fact, the Rosario's lowball estimate comes despite growing ideas that soybean acreage might see a steeper drop, with growing expectations that Mr Macri's government, which cut the export tax on soybeans by 5 points to 30%, will break a pledge to reduce it to 25% next year.

Keeping the tax rate stable would hand the government a revenue boost estimated at 20-bn pesos ($1.3bn).

"If the current 30% tax is maintained, Argentine farmers' planting decisions might be affected in 2016-17," said Tobin Gorey at Commonwealth Bank of Australia.

At Chicago broker RJ O'Brien, Richard Feltes flagged market talk in the last session of "Argentina nixing its cut in soybean export tax, which could trim soy acreage".



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