South America Calling

Buenos Aires Exchange Sees Soy Area Down 1%

With just a couple of weeks to go before soybean planting begins in earnest in Argentina, the Buenos Aires Cereals Exchange forecast area would decline 1% to 48.9 million acres.

While there are few positive factors pushing farmers into planting the oilseed, many will sow anyway, attracted by the ease with which soy can be produced, the low costs of production, the liquid market and creating good conditions for planting corn next year, said the exchange.

In addition, the climatic outlook is positive with El Nino likely guaranteeing sufficient rainfall for soybeans to develop without significant stress, it said. Of course, there are region in the east where rainfall threatens to be excessive and flooding is a threat, although this is not a massive negative.

However, margins look tight due to low prices and inflationary pressure on costs, with the situation looking bleaker the farther the farm is from port or the more marginal the production areas.

But it isn't just soybean area that will likely decline. The same factors will also lead to significant reductions in area for the other five major row crops -- corn, sunflowers, sorghum, wheat and barley -- the exchange added.

In the upcoming season, there will be a large number of fields that don't produce well or have problems with resistant weeds, due to insufficient care in less productive regions.

Argentines go to the polls of Sunday to elect a new president. Frontrunner Daniel Scioli has promised some reforms to the country's policy of restricting grain exports, but there are few details and the race could go to a second round in November. Faced with uncertainty, farmers like soybeans despite the fact that corn prices have far outperformed soybeans on local markets in recent months.

Argentine soybean area has been stable at around 49 million acres for the last two years, indicating this is pretty much a ceiling for area.

(AG)

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