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ECONOMY | 13-01-2022 15:59

Argentina takes axe to soy forecast, outpacing USDA's reduction

Argentina’s key agriculture areas have been hit by intense and prolonged heat, coupled with little or no rain.

 A drought that's devastating crops across South America has prompted swift cuts to forecasts for the soybean harvest in Argentina, the world's biggest exporter of soybean oil and meal.

The Rosario Stock Exchange has cut its estimate for the crop by 11 percent to 40 million metric tonnes, well below the US Department of Agriculture's (USDA) monthly forecast, which on Wednesday was lowered by about six percent to 46.5 million.

Soybean meal and oil traders will be paying close attention to the Rosario figures, as that bourse specialises in Argentina's agricultural heartland, the so-called "core zone." Moreover, it tends to set the tone with its forecasts, while analysts from other institutions, such as the USDA or the Buenos Aires Grain Exchange, publish them later. Soybean meal is used in livestock feed, and soybean oil is used for cooking and as biofuel.

Rosario analysts led by Cristian Russo wrote in a monthly report that drought and hydrothermal stress have been so severe in the last 30 days that they rule out the possibility of a normal season.

The Buenos Aires Grain Exchange releases its weekly report at 1pm New York time on Thursday, but the exchange will not deliver new soybean and corn production estimates until a little later in the season. Argentine beans are harvested in the second quarter.

Soybean meal futures in Chicago fell as much as 2.7 per cent in early trade to US$405 per short tonne.

Argentina's government will join traders in taking a hard look at crop forecasts, as the country relies on soybean and corn harvests - and the dollars their export generates - to prop up a struggling economy. The last drought of the magnitude of this season's, in 2018, cut at least one percentage point from the nation's gross domestic product.

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by Jonathan Gilbert, Bloomberg

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