Opinion

February drought significantly cuts Argentinian soybean forecast

Soybean
Argentina
Published Mar 15, 2021
According to the Rosario Grains Exchange, the February drought has significantly cut the Argentinian soybean output forecast for the 2020-21 marketing year (April 2021 - March 2022). The forecasted yield is now seen at 27.5 quintals/hectare, a decrease of 6% on January estimates and 10% lower than the previous year. This revised projection for soybean output is down 4 million MT on the last estimate to 45 million MT, a 11.24% reduction year on year.

Argentinian Soybean Output

Source: Rosario Grains Exchange

Second crop soybeans most affected by drought

The second crop soybeans were most affected by the drought. First soybeans are planted in October, while second-crop soybeans are planted in late November, shortly after the Argentinian wheat harvest. This season, the first-crop soybeans were planted in 11.9 million hectares, while the second-crop soybeans were planted in 5.3 million hectares. Approximately 850,000 hectares of the projected 17.2 million hectares will be lost due to the drought, which, to a large extent, are second-crop soybeans.

February and the first ten days of March provided inadequate rains to most of the central farm area in Argentina, causing significant losses to yields and planted areas. Ground moisture is also rapidly being reduced in areas where crops are going through critical reproductive stages. Besides soybean farms, key corn farming areas have also been affected by the drought. According to the Argentine Agrarian Federation (FAA), the soybean growing areas most affected by the drought, in terms of acreage and yield losses, were Santa Fe, Buenos Aires, Entre Ríos, and La Pampa. Simultaneously, Cordoba, NOA, Santiago del Estero, and part of the north center of Santa Fe were less affected.

Market Implications

The latest reduction in the Argentinian soybean production forecast is expected to boost Brazilian and US soybean exports as Brazil and the US are Argentina’s main competitors in the global soybean export market. This also raises concerns over low global supplies of soybean that have kept soybean prices nearing seven-year highs. According to Thompson Reuters, the dry weather is set to continue through mid-March. As the season is almost over, continued dryness will severely affect the remaining soybean yields and raises concerns about the adequacy of soil moisture to help growers plant wheat and barley during mid-year.

According to the USDA, the lowered forecast on Argentinian soybean output is set to affect the country’s soybean exports, forecasted to fall one million tonnes to seven million tonnes for the 2020-21 marketing year. The USDA has also reduced Argentina's soybean crush projections to 41 million tonnes, a decrease of 1.5 million tonnes compared the previous forecast and a 10.2% increase from the revised projected 2019-20 levels as the country’s crushers benefit from new export taxes and resume normal operations following COVID-19 and port worker strikes.

Source:

S&P Global Platts. “Argentinian soybean output forecast cut significantly on February drought: BCR.

Reuters. “UPDATE 3-Dryness wallops Argentina's soy crop forecast, more cuts expected.

World Grain. “Argentina’s soybean production slips.

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