Argentina began the year with generally favorable growing conditions, but heat and dryness during December and early January has severely reduced production potential. Rainfall during December was well below normal for most growing areas. Rainfall was from 50 percent to less than 25 percent of normal during the month. Temperatures also soared to the 90s and in some cases to over 100 degrees, particularly late in December and early January as early planted corn entered pollination. The combination of heat and dryness has caused crop production estimates to plummet. Early production estimates were 28 million to 30 million metric tons based on increased plantings and a return to trend yield. Given adverse weather, though, expectations now are in the low 20s with some estimates well below 20 million metric tons. Including this year, Argentine corn yields have been below trend four of the last five years.
Argentina’s corn plantings are estimated at 5 million hectares or 12.35 million acres, up 10 percent from a year ago. However, due to the early season heat and dryness, harvested acreage is expected to be down sharply as some fields are abandoned or utilized as livestock forage rather than harvested for grain. Even with the increase in planted acreage, harvested acreage is estimated at 3.5 million hectares, down 3 percent from a year ago and implies about double the normal rate of abandonment. This would still be the second highest harvested since 1960, only trailing last season’s 3.8 million acres.
The current subsoil moisture map indicates just how widespread the dryness is across Argentina, including the heaviest corn growing region of central Argentina. The map does not include the recent round of rains that began around January 20. While beneficial for the crop, the rainfall only provides a modest boost to subsoil moisture. The dryness extends deep enough into the soil profile that additional timely rainfall will be needed through February and early March to maintain yield potential. Otherwise, further production losses are likely. Also, note the similarity of the dryness this year to 2009. The soil moisture maps are quite similar in the severity and scope of the dryness.
This season heat and dryness began to evolve somewhat earlier than in 2009 and also encompassed more of the highly-productive growing area of central Argentina. Weather during the remainder of the season in 2009 was mixed. In January, dryness persisted in the south, but a wetter pattern emerged in the northern half of the country. This pattern persisted in February with above normal precipitation in northeastern Argentina, but the rest of the corn producing area continued dry. Some timely rain arrived in early March. However, the drier than normal pattern basically continued through March for most locations with the exception of the east central Argentina where rainfall was above normal.
We estimate the corn yield at 6 tonnes per hectare, well below the trend yield at 7.8 tonnes and slightly below 2009’s 6.2 tonne yield. This would be the lowest national yield in ten years. Much depends on how weather unfolds the rest of the season. Current forecasts call for additional rainfall into early February. Rainfall amounts are not expected to replenish soil moisture, but would prevent renewed crop stress for another week or two. Based on a yield of 6 metric tons per acre and harvested acreage at 3.5 million hectares, Argentine crop production would total 21 million tonnes, down 7 percent from 22.5 million a year ago. USDA’s January estimate was 26 million tonnes, but recent production estimates from other sources range from 18 million to 23 million. Argentina’s Agriculture Ministry rates the crop as only 1 percent very good, 32 percent good, 42 percent average and 25 percent poor and pegs production at 23 million tonnes.
Although Argentine corn production accounts for only a few percent of global production, exports represent 15 percent to 20 percent of world trade. Argentina’s corn exports correlate strongly to production. Early this season when production estimates were near 30 million tonnes, it appeared Argentina could potentially export 20 million tonnes or more. However, with production estimated at 21 million tonnes, the historical relationship displayed in the graph points to exports of 14 million to 15 million tonnes. That compares to USDA’s current figure of 18.5 million. Lower exports from Argentina would shift demand to the U.S. and could boost U.S. exports by 100 million bushels or more from USDA’s current forecast at 1.650 billion bushels. U.S. ending stocks are already projected to be tight, so the additional export demand is bullish for 2011-crop prices. The market has already begun to reflect stronger export demand prospects with cash and futures prices up 50 to 60 cents per bushel from the mid-January low.