Oil World has cut its forecast for Argentina's soybean crop for the second time this month over fears that drought will prevent farmers from realising their ambitious for huge plantings.

The revision raises further questions over Washington's decision last week to increase its estimate for Argentina's soybean output by 500,000 tonnes to 53m tonnes.

Oil World cut by a further 2m tonnes, to 48m tonnes, its forecast for the South American country's 2009-10 harvest.

While this would still represent a 50% increase on last year's crop, which has badly hurt by drought, and would be enough to beat the 2006-07 record by 800,000 tonnes, the German analysis group warned that Tuesday's revision might not be its last.

"The next few weeks will show whether this downward revision has been premature or whether further downward adjustments will become necessary," the group said.

'Critical' situation 

Farmers' big plans for soybean plantings - to cash in on prices elevated in part by last year's weak output in Argentina, the world's third-biggest producer of the crop – have been put in jeopardy by a continuing shortage of rain in many areas.

The La Pampa region in central Argentina recording only 16% of average rainfall in October.

While some parts have Argentina have received some rains this month, with website Martell Crop Projections some relief to drought-stricken areas later this week, at least 7m hectares of land earmarked for soybeans is suffering a severe moisture deficit, Oil World said.

"The optimal planting period will be over in several regions in about two weeks," the group said, terming the situation "critical" for sunflowers and groundnuts as well as soybeans.

"We no longer believe that this year's planting intentions can be carried out."

Rosier outlook

The US Department of Agriculture, however, said in a report on Thursday that in Argentina's western drought spots "many weeks remain for soybeans to benefit from an improved weather pattern".

"In contrast, current conditions for the eastern half of the growing region are substantially better than a year ago, when a bad drought was worsening."

The department, in a move questioned by many investors, raised its plantings forecast by 200,000 hectares to a record 18.8m hectares.

Sunflower pessimism 

Nonetheless, the USDA's opinion on sunflower prospects appears to concur with that of Oil World.

"Dryness in western Argentina has already affected sunflowerseed production," Thursday's report said, cutting the forecast for sunflower output by 510,000 tonnes to 3.2m tonnes.

"Depleted soil moisture stopped growers from sowing any more sunflowers in La Pampa, Cordoba, and Chaco, which together account for about one-third of the country's area."