Argentinean corn and soybean growers have suffered irreversable damage from hot, dry weather, scuppering the country's harvest prospects and more than likely adding fuel to the grain market rally that skyrocketed prices to multi-year highs, according to Rabobank.
Recent rainfall brought some relief to extreme dry areas, Argentina’s crops are still expected to fall short of expectations, Rabobank analysts led by Luke Chandler said in a recent report. Smaller harvests in Argentina, the world’s second-biggest corn exporter behind the US, “places increased pressure on already-tight global supplies,” Rabobank said in the report.
The Rabobank analysts cut their forecast for Argentina’s corn crop to 20 million metric tons, down 11% from a previous estimate of 22.5 million metric tons. Last year, Argentina harvested 22.8 million metric tons, according to the USDA.
March corn futures fell 6 ¾ cents to $6.44 a bushel, down 2% on the week. March soybean futures fell 1 ½ cents to $13.98 a bushel.
The analysts also lowered their outlook for Argentina’s soybean crop, estimating the harvest at 48 million metric tons, down 7.7 percent from a previous forecast. Argentina harvested 50.5 million metric tons in 2010.
“Recent rains have lowered the risk of extreme downside to our soybean forecast,” Rabobank analysts said. But “irreversible” damage to Argentina’s corn crop will have a bigger impact on prices “due to our view that the global corn balance sheet is more precariously balanced than soybeans,” Rabobank said.
Smaller production in Argentina signals US. livestock feeders will face even greater competition from the global export market for domestic corn supplies. Beef and pork producers have already watched feed costs skyrocket as corn rallied above $6 a bushel to the highest levels since mid-2008.
With global corn supplies tighter than soybeans, “we expect the recent trend in CBOT soybean and corn futures prices to continue as corn has a stronger need to ‘buy’ US acreage,” Rabobank said.