Argentine storms to help grain output, hurt quality

Reuters News
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Posted: Oct 22, 2012 11:37 AM
Argentine storms to help grain output, hurt quality

By Hugh Bronstein

BUENOS AIRES (Reuters) - Argentine grains output will benefit from this year's early and potent arrival of El Nino-related rains, but low crop quality linked to flooding is likely to undermine the expected increase in soy and corn volume.

Consumer nations hope South American breadbaskets Argentina and Brazil can help bolster global food stocks cut by dry weather in grains behemoths Russia and the United States.

The violent storms that pelted the Argentine Pampas in August and September allowed growers to plant in areas usually too dry for farming. On the downside, corn sowing has been bogged down by mud while floodwaters hit some wheat crops, making them vulnerable to quality-sapping pests and fungi.

"This year's El Nino effect has been one of the earliest on record, and one of the most chaotic," said Eduardo Sierra, climate adviser to the Buenos Aires Grains Exchange. "The effects will include high volume but low crop quality."

El Nino, a climate pattern characterized by warm ocean temperatures in the tropical Pacific, tends to bring rain to South America's grains belt.

Most climate experts expect a net increase in 2012/13 output that should at least help stabilize soaring global prices of grains, but this year's fickle weather could bring more surprises.

"Let's not pop the champagne until the harvests are in, and maybe even sold, because the weather will remain very unstable and could do more damage than expected," Sierra said.

The U.S. farm belt is coming off its worst drought in half a century and Russia's wheat crop is down more than a quarter from last year. The losses have lit a fire under Chicago grains futures, propelling wheat 31 percent higher since January, while soy has jumped by more than 28 percent and corn 17 percent.

Argentina is a top supplier of all three crops.

Sierra said this year's unusual weather could set the stage for Argentina to produce the record 55 million metric tons of soybeans and the record 28 million metric tons of corn forecast by the U.S. Department of Agriculture. The USDA sees Argentina's 2012/13 wheat output at 11.5 million metric tons.

About 1 million hectares (2.5 million acres) of prime Buenos Aires farmland will probably be ruined by floods this season, Sierra said.

"Nonetheless," he added, "the rains have increased the overall area in Argentina that can be used for agriculture this year, amply compensating for the losses."

Argentina says 2012/13 production of soy, its top crop, could smash previous records and hit 58 million metric tons. This year's planting is just beginning.

The country is the world's biggest exporter of soyoil, used in biofuels, and of soymeal animal feed used as far away as China, where the new middle class has begun a love affair with beefsteak.

WACKY WEATHER

The storms that have dominated Argentina's 2012/13 grains season began in August, when Buenos Aires province usually gets about 25 millimeters (1 inch) of water. This year Buenos Aires and surrounding areas received 290mm, flooding farm areas that were inundated again 30 days later by El Nino-related showers.

"For 60 percent of the agriculture business in Argentina, El Nino-induced weather will be positive, the other 40 percent will have varying degrees of losses," said Anthony Deane, head of consultancy Weather Wise Argentina.

He forecasts that southern Brazil, which produces half of that country's soy, will get too much rain while the other half of the crop receives too little.

Considering the damage that the weather will do to crop quality in the 2012/13 season, Deane warns that consumers might end up disappointed with the amount of downward pressure that the region's output puts on international grains prices.

The back and forth of clashing weather systems will likely delay soy collection while hurting harvest quality, especially in southern Brazil, Deane said.

"Argentine soybeans should suffer a little less, because rainfall volume will be less over the long run than in southern Brazil," Deane said.

He forecasts moderate rains in November, which should give soy planting a good start.

"But," he added, "we expect excess rainfall again in December, which means that an important percentage of planned planting of soybeans will not be able to get completed."

(Reporting by Hugh Bronstein; Editing by Dale Hudson)