South America Calling

Argentine Farmers Plant Defensively

Argentine wheat and corn area will fall dramatically in 2015-16 amid political and economic uncertainties and rising costs that lead to tight margins.

The Buenos Aires Cereals Exchange estimates wheat area will fall by 16% in the current season, while corn area will drop by 15% and soybean acres will stay flat.

Heavy recent rains have created good soil moisture conditions in many regions, but flooding has inhibited wheat in some areas.

According to the AACREA farmer group, in terms of percentage of land planted in 2015-16, soybeans will account for 57%, up sharply from 47% last year; wheat will account for 11%, down from 14% in 2014; and corn for 17%, down from 25%.

With the leading candidates in Argentina's election not being drawn on whether or when grain export taxes may be reduced and the timing of a devaluation of the Argentine peso uncertain, farmers are being very cautious.

That's because without a bump from these two factors, margins look very tight with prices in the doldrums and costs on the rise.

Some 88% of Argentine farmers believe the economic situation is worse than one year ago, said AACREA. Meanwhile, only 27% believe the situation will improve in the medium term, down from over 50% at the same time last year.

Overall, planting will fall by 11% with 37% of large commercial farms deciding to reduce area, while some 24% will reduce the level of technology employed

Some 73% of CREA associates polled said the financial position of their companies had deteriorated over the last years, some 10 percentage points higher than the year before.

Argentine farmers have been hurt in recent years by heavy export taxes, raging inflation and an artificially bolstered Argentine peso, which eats into their margins. They hoped leading presidential candidates would offer signs that the situation may improve in 2016. Unfortunately, the promises have been vague, thus far.

(AG)

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