US farm officials lopped more than 1.7m tonnes from their forecast for Argentina's grains harvest, citing the weather extremes which could yet bring further downgrades if rain is not forthcoming in corn-growing areas.

The US Department of Agriculture's Buenos Aires bureau blamed the downpours in the latter months of 2012 for an estimate for the wheat crop of 10.3m tonnes, down one-third year on year and 700,000 tonnes below the official USDA number,

"Final yields are reported to have been lower than expected, affected by excess rain and humidity," the bureau said in a report, flagging that some commentators were talking of even lower figures.

The Buenos Aires grains exchange pegged the harvest, which was also reduced by a switch by farmers to growing barley, at 9.8m tonnes.

24-year low

The downgrade has slashed Argentina's likely wheat exports in 2012-13 to 4.3m tonnes, the bureau added, also representing a drop of 700,000 tonnes from the official USDA estimate, and below the 6m tonnes the Buenos Aires government initially permitted for shipment.

"The government of Argentina concerned that it will be impossible to fulfil the 6m-tonne export quota, therefore exports are limited to 2m tonnes through February 2013," the report said.

"The government will also conduct a survey to determine the amount of wheat stocks in-country in order to free the export surplus in early March."

At 4.3m tonnes, Argentine wheat exports would represent the lowest in 24 years, and reduce further the slender supplies of wheat available from major shipping countries.

Feed vs malting

The wet weather had also affected the barley crop more than had been thought, with the USDA cutting it estimate for Argentina's harvest by 500,000 tonnes, and its forecast for exports by 400,000 tonnes.

The downgrades by the bureau, which pegged feed barley exports at 2.1m tonnes and malting barley shipments at 1.5m tonnes, tally with comments from RMI Analytics over a crop which deteriorated in the last quarter of 2012.

The quality concerns have lifted to about \$350 a tonne export prices for high quality malting barley, excluding freight, a \$50-a-tonne premium to feed, RMI said.

"Depending on the final qualities the spread between malting and feed has the potential to increase," the Swiss-based consultancy said.

'Good rainfall is needed'

While the wet weather had also lowered rice potential, in delaying plantings, it was this year's dry weather which prompted the USDA staff to cut by 500,000 tonnes, to 27.5m tonnes, their forecast for the Argentine corn crop.

While "optimal" soil moisture early in the growing season had meant a good start to thje crop "weather since late December has been very dry," the bureau said.

"Good rainfall is needed in the next few days and during February to secure expected generalised high yields,"

The downgrade is the latest in a series for the crop, with some commentators pegging it as low as 22m tonnes, and comes amid a focus by investors on Argentina's weather, following unexpected rains on Wednesday and Thursday.

'Remains threatening'

However, Gail Martell, at Martell Crop Projections, said that the weather outlook "remains threatening for continuing drought" in southern Brazil and Argentina.

"The temperature outlook in Marcos Juarez, a corn area in eastern Cordoba, calls for maximum temperatures over 90 degrees Fahrenheit on eight of the next 10 days.  Both the extreme heat and the dry atmosphere are causing exceptional moisture stress in corn and soybeans.

"The weather in South Brazil would also continue dry with low humidity and little rainfall over the next several days.

"The Rio Grande do Sul forecast is particularly stressful," with temperatures expected at 99 Fahrenheit today.

Informa Economics will later on Friday reveal fresh estimates for South American crops.

The USDA will next week release its latest monthly Wasde report on world crop supply and demand. 

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