South America Calling

SAO PAULO, Brazil (DTN) -- Rains have been ample across many parts of the Argentine grain belt over the last few weeks, allowing farmers to start planting corn in central and southern Santa Fe province, according to the Rosaria Cereals Exchange.

The precipitation has caused flooding in some areas but has created perfect conditions for corn planting in many other parts of Buenos Aires and Santa Fe provinces.

Don't expect planting percentages to explode over the next few weeks though. That's because Argentine farmers are planting more and more of their crop late, in November and December, so that the corn isn't in the reproducing stages when the notorious January dry spells hit. This strategy saved Argentina from potential disaster last year.

Last week, the Buenos Aires Cereals Exchange forecast that corn output would drop 23% this season.

Farmers will abandon the cereal because of low prices and economic turmoil, the exchange explained in a report.

With prices so low, farmers will switch land to soybeans, which is substantially cheaper to produce. Keeping costs down is very important in an economy where inflation rages at more than 30% per year.

The exchange forecasts output will fall to 20 million metric tons (mmt) from 25.2 mmt last year, while planted area is seen falling 16% to 7.4 million acres, from 8.8 million acres the year before.

Corn is costlier than soybeans, and also subject to export restrictions. The government has yet to announce how much corn it will license for export in the coming season. This lack of clarity on export potential is just another reason for farmers not to plant corn.

Argentina was actually the world's No. 2 corn exporter in 2013. It is expected to fall to No. 3 in 2014 as the U.S. returns to the market and will likely slide to No. 4 in 2015 due to the smaller projected crop.

Alastair Stewart can be reached at Alastair.stewart@dtn.com

(ES)

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