US officials stick by downbeat Argentine soy harvest estimate

08.11.2016

US officials stuck by a conservative estimate for Argentina's soybean harvest, citing the dent to the appeal of the oilseed from a delay to an export tax reduction, even as rains delay sowings of what farmers to intend to sow.

The US Department of Agriculture bureau in Buenos Aires stood by a forecast of a 55.0m-tonne Argentine soybean crop in 2016-17 – a drop of 1.8m tonnes year on year, and representing a second successive year of decline.

The estimate, which is 2.0m tonnes below the USDA's official forecast, reflected an idea of plantings falling by 750,000 hectares to 19.5m hectares, after the government backed down on a pledge to cut Argentina's soybean export tax by a further 5 points, to 25%.

"There continues to be discussion over the short- and long-term effects" of the decision, the bureau said.

Area affected

The fall in area will be felt "primarily" in the central growing area, including parts of Cordoba, Entre Rios, Santa Fe and Buenos Aires provinces, the bureau said.

It was still uncertain how a concession the government had made to northern provinces - in terms of rebate equivalent to 5% of the export price - would affect farmer decision-making in an area where the greater distance needed to get crops to port makes growing exported ags, such as soybeans, structurally less profitable.

"One segment of contacts reports that the decision… will not necessarily encourage a significant increase in area planted but will act as income support for producers who traditionally endure a higher cost burden, due to pest control and transportation costs," the bureau said in a report.

"Other sources suggest that these northern producers may opt for more soybeans in December."

'Flooding likely to worsen'

The comments come too amid a growing market debate on the impact on Argentina sowings prospects of heavy rains, which are expected to continue this week.

"Forecasters say flooding is likely to worsen through northern Buenos Aires and its surrounds – key soybean production regions," said Tobin Gorey at Commonwealth Bank of Australia.

"Planting delays could extend out to the end of November given that the affected areas do not drain particularly well," with November, with December, one of the two main soy-plantings months.

"On average, approximately 40% of the soybeans in Argentina are planted by the end of November," said influential analyst Michael Cordonnier.

'Still plenty of time'

However, while noting that sowings were perhaps 5% completed, behind the average of 9% by now, he added that "there is still plenty of time to get the soybeans planted in a timely manner".

And US broker Benson Quinn Commodities said that while "only a few beans have been planted… this is not seen a huge concern for Argentine production just yet".

Benson Quinn Commodities quoted an estimate that 600,000 hectares of Argentine crops overall have been affected by flooding, but noted that "only a few beans have been planted", with the issue likely more serious for wheat crops, which are later in their development cycle.


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