Crop setbacks in Argentina grabbed the spotlight as agricultural commodity investors prepared for a US report in which South American harvest estimates are expected to prove potential market movers.

Cargill's AWB crop handling division cautioned that the heavy rains which are dogging Argentina's barley and wheat harvests, besides corn and soybean plantings, are "impacting their barley quality", contributing to "tight" world supplies of the grain.

Separately, Swiss-based malting barley consultancy RMI Analytics cautioned that while barley in parts of Buenos Aires province looked "promising", that harvested around Rosario in Santa Fe shows poor yields and quality results which struggle to make malting grade.

"Occasionally the barley cannot even be used as feed barley for exports as screenings are that poor."

'Causing havoc'

The comments come amid mounting speculation that Argentina has cut to 4.5m tonnes, from 6m tonnes, quotas on wheat exports following rain damage to the crop – rumours that were given momentum by reports that several wheat vessels had not been allowed to sail last week.

The rain "is damaging wheat crops yet to ripen, delaying harvesting those which are ripe and causing havoc with the logistics operation to get the grain to the ports", traders at a major European commodities house said.

"In many areas the roads are too flooded to allow trucks to operate."

'Extreme wetness'

Argentine farm officials forecast the domestic wheat crop at 11.1m tonnes, down from some 15.5m tonnes last season, a decline fuelled by a drop of sowings this year in favour of barley.

Argentina is also seen as likely to see revisions in row crops too, thanks to the rains, with a cut to production of corn, which is earlier sown than soybeans, seen especially likely.

"Given the extreme wetness in the major Argentine growing areas, which is significantly delaying planting, many in the trade have lowered their estimate of Argentine corn production to 24.0m-27.0m tonnes, versus the USDA's estimate of 28.0m tonnes, which appears optimistic," Dan Cekander, director of grain market analysis at broker Newedge USA said.

At Macquarie, Chris Gadd, while forecasting no revisions by the USDA to most South America row crop estimates, said that "the only change that that may make is to lower their forecast for the Argentine corn crop".

About demand

Indeed, the December Wasde report is not expected to see too many revisions, with the USDA not until January set to revisit the domestic crop production numbers many investors still have under the microscope.

Instead, "this briefing will be more about demand", Don Roose, president of US Commodities said, with the Wasde expected to nudge lower estimates for US corn and wheat exports, and raise forecasts for year-end inventories.

For soybeans, the forecast for stocks at the close of 2012-13 is seen being downgraded, thanks to the strong pace of shipments so far in the season.