In addition to weather risks in the United States and the effects of the Russian military operation in Ukraine, the crop market is facing a new threat: The almost relentless drought affecting soybean and corn crops in Argentina.
Drought has accumulated for three consecutive years attacking wheat plants harvested in November and December.
Given this phenomenon, the national government can limit exports to guarantee local demand.
Local farmers are having one of the most difficult years to plant their most commercially important crops: soybeans and corn.
Argentina is the largest supplier of soybean meal for cattle feed and soybean oil for cooking and biofuels, so traders from Chicago to Kuala Lumpur are watching the situation closely.
Government leaders are also preparing for next year’s general election.
That’s because Argentina’s delicate finances depend on exports of next year’s soybean crop, which are worth $25 billion.
Generally, soybean planting begins at this time, with three-quarters of the field work completed by the end of November.
But many farms are too dry to plant seeds in. The rain on Tuesday night (October 25) was a welcome relief, but not enough.
“These rains hardly change anything,” said Maria de Estrada, a senior official at the government’s agricultural emergency department.
De Estrada notes that farmers are starting the 2022-23 season in even drier conditions than 2008-09, a season that brings back painful memories among farmers.
While the La Niña weather phenomenon will weaken during the Southern Hemisphere summer, the outlook remains bleak for the next two months, with drought continuing for most of the planting window.
In La Pampa province, only half of producer Julio Reumann’s 600 hectares reserved for soybeans have been wet enough to consider planting a seed in the ground.
Corn planting is also off to a slow start. That means corn from Argentina, the third-biggest supplier, will reach world markets later than usual as farmers look for rain to produce a delayed crop.
If it remains dry, they will take their chances with soybeans, which require less nutrient input and are more drought tolerant, highlighting a preseason shift to oilseeds.
“If it rains enough, we will plant 100 acres of late corn and 100 soybeans from here; if not, we will plant everything with soybeans,” said Ariel Striglio, a farmer from Santa Fe province.
In the end, up to 300,000 additional hectares of soybeans could end up being planted on top of the Buenos Aires Grain Exchange’s current national estimate of 16.7 million hectares, said Martin Lopez, a forecaster for the exchange.
Cold fronts that bring bursts of moisture, like the one on Oct. 25, could form within La Niña, and another one is likely to appear around Nov. 8, said Natalia Gattinoni, a government agricultural meteorologist.
The problem with waiting for rain is that soybeans yield less when planted late.
Argentine farmers need a strong soybean season to salvage next year’s crop investment cycle.
Reumann is already paying penalties for wheat contracts it will not be able to honor.
Argentina’s solvency as a nation is also at risk as the central bank cannot spare those dollars.
“The small wheat crop and then the corn crop leave a long summer ahead until the soybeans are harvested,” said Mateo Reschini, research analyst at Inviu.
“If soybeans don’t get rain, it could be a disaster.”
“I’ve never seen it this bad,” said farmer Striglio. “I pray for rain.”
With information from Bloomberg
