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Rains dampening ideas on Argentina's corn sowings surge - ADM

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Wet weather in Argentina is curbing the swing to corn, from soybeans, Archer Daniels Midland boss Juan Luciano said, noting too the enhanced competitiveness of the country's soymeal supplies on world markets.

Mr Luciano, who grew up in Argentina, acknowledged that the "the intentions of the farmer has been to shift to corn some acreage" in the South American country, after the government delayed plans to cut by a further 5 points, to 25%, the soybean export tax.

While the government did show some concessions - introducing "some reductions for some provinces in the north, to kind of balance the people that are farther away from the ports" – the move has, in cutting prospects for farmers' revenues from soybeans, encouraged growers to sow alternative crops, and notably corn.

Farmers will in fact hike their corn plantings for the 2016-17 crop, harvested early next year, by 27% to 4.90m hectares, according to the Buenos Aires grains exchange.

'A bit more difficult'

However, persistent rains - which have also added Argentina to the list of countries facing potential quality downgrades to its wheat harvest – are raising doubts as to whether farmers will be able to plant as much corn as they intended.

"Early planting conditions are maybe making it a little bit more difficult to [raise corn sowings]," Mr Luciano said.

"Some people have started to plant some soybeans," which can be later seeded.

'Flooded out'

The comments come at the close of the early sowing season, which has shown poor planting progress thanks to the wet, with 36% of corn seeded as of last week, according to the Buenos Aires grains exchange, behind the average of 41%.

Argentine farmers are reluctant to sow corn in November, as the crop would reach the vulnerable pollination phase in January, often the hottest and driest part of the summer.

Separately, Michael Cordonnier, the influential analyst, said that "prospects for the corn crop in Argentina are not quite as good this week as they appeared one or two weeks ago".

He estimated at 500,000 hectares the total crop area "flooded out" last week by rains.

'Increased competitiveness'

Mr Luciano also highlighted the role of cheap Argentina in cutting oilseed processing margins, with the group's own crushing division reporting a 57% tumble to $76m in operating profits in the July-to-September period, one of the few blemishes on ADM's well-received results.

"We saw some period of increased competitiveness of Argentine meal," he said.

Meal, used as a livestock feed, and vegetable oil, used in the likes of cooking oil and biodiesel, are the two main products from crushing oilseeds.

Nonetheless, he was upbeat over prospects for the group's key North American oilseed crushing operations, flagging "strong demand" for meal.

"We're thinking about 5% meal consumption growth for next year," he said.

"And we believe that the US will have high crush margins, and we feel good about the potential expansion of that crushing margin."

While the margin "just could be a little bit attenuated by the fact that we need to fight with some substitution maybe over the next quarter" with rival products such as distillers' grains, "we feel good in general" about prospects for ADM's oilseeds division.

By Mike Verdin

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