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Corn price dip spurs SA farmers to prioritise soy

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South American farmers may switch from corn to soybeans by more than had been expected in the forthcoming planting season thanks to price moves, which have moved the grain to being a loss-making crop for many growers.

The US Department of Agriculture bureau in Buenos Aires estimated the Argentine corn area at 3.3m hectares for 2014-15 - a five year low.

The forecast, which contrasted with the USDA's official estimate of a rise in area to 3.65m hectares, reflected the "significant" fall in corn prices, which on the Rofex exchange have fallen by more than 10% over the past month, September basis.

November soybeans have dropped by 3%.

Corn vs soybeans

"A few months ago, the sector was more optimistic, but the large corn harvest in the US and the drop in world corn prices rapidly made producers revisit their planting intentions," the bureau said, estimating a harvest of 23.5m tonnes, 2.5m tonnes below the USDA's official forecast.

"We project a shift of some corn area to the [less] costly soybean production," with the oilseed, as a nitrogen fixing plant requiring, for instance, less fertilizer.

However, with growers "taking planting decisions at the last minute", the sowing ratio between corn and soybeans "can shift again".

Corn is typically planted in Argentina between September and January.

'Concerned with profitability'

The comments follow an estimate by AgRural that Brazilian soybean sowings will jump by 4.9% in 2014-15 to a record 31m hectares, again a reflection of prices, which for corn have been particularly poor in Brazil, falling below floor levels guaranteed, in theory, by the government.

The forecast is 500,000 hectares above that of the USDA and, according to Chicago broker Allendale, could "with normal weather conditions" see a harvest of 94mn tonnes, easily beating the 2013-14 result of 85.6m tonnes.

"Brazilian corn producers are concerned with profitability this year," research institute Cepea said, noting the poor pace of the country's exports so far in 2014, contrasting with buoyant soybean shipments.

Brazil's soybean exports in the first half of the year equalled 74% the total for 2013, signalling the 2014's overall volumes "might hit a record", Cepea said.

Macquarie earlier this week noted the role of strong Brazilian soybean shipments in depressing capacity available for handling sugar exports.

Barley, wheat

The USDA's Buenos Aires office was also downbeat on prospects for Argentina's barley output, foreseeing a slump of 35% to 3.10m tonnes in the harvest, in part thanks to the heavy rains preventing sowings in some areas.

However, it estimated the wheat harvest at 12.5m tonnes, a rise of 2.0m tonnes year on year, and in line with the USDA official forecast, and exports of 6.5m tonnes – depending on what the government allows, and whether quality is affected by harvest-time rains.

El Nino weather patterns, of which one may be in the offing, have a habit of bringing Argentina wetness in October-to-December periods.

By Agrimoney.com

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