Argentina’s winter crop threatened by La Niña

Grain Brokers Australia August 10, 2021

Ships carrying grain in Argentina and south-east Brazil are having to load fewer tonnes because of low river levels that increase the risk of running aground. Photo: Antares Shipping

THE PROSPECTS of a record wheat crop in Argentina this season have taken a hit over the last two weeks, with bad weather threatening to derail crop progress. A lack of soil moisture and regular frosts in the northern and central regions is the biggest issue in the near term as the crops approach spring and enter the critical, moisture dependent reproductive phase.

The USDA’s Foreign Agricultural Service (FAS) released their latest Grain and Feed Update for Argentina on July 27, before the recent weather concerns became apparent. It expects wheat production in the 2021/22 marketing year to reach a record 20.8 million metric tonnes (Mt). This is 0.3Mt higher than the official USDA number and 1Mt higher than the current record of 19.78Mt produced in the 2019/20 season.

The report pegged the planted area at 6.65 million hectares (Mha) and suggested it would have been higher, save for dry conditions during planting in parts of northern Cordoba, Santiago del Estero, and Chaco. The FAS are pegging wheat exports at an all-time high of 14Mt, including wheat flour, eclipsing the 13.5Mt exported in 2019/20. This is also up more than 30 per cent (pc) from the 10.7Mt expected to be shipped in the year to November 2021.

Barley production for the 2021/22 marketing year is forecast at 4.8Mt, 17pc higher than the 4.1Mt produced last season, but 0.26Mt below the record crop of 5.06Mt in the 2018/19 season. The area planted to barley is estimated at 1.2Mha, 26pc higher than the 950,000 hectares harvested in 2020/21. Exports of barley are forecast to be 3.2Mt, 28pc higher than the 2.5Mt expected to be shipped in the twelve months to November 2021.

According to the Buenos Aires Grain Exchange (BAGE), planting of this year’s wheat crop is almost complete with 99.9pc of the projected area planted by the end of last week, up 0.7 percentage points week-on-week. The seeding action is concentrated in the southern agricultural regions where the season commences much later than in the north to minimise the risks associated with late-season frosts.

The fall in wheat crop conditions and soil moisture status since late July is the telling story. The good-to-excellent crop rating dropped from 55pc to 47.6pc in the seven days to Wednesday, August 4. The soil moisture status plunged from 64.9pc favourable-to-optimal to 56.6pc over the same period. These are massive changes when it is still winter, and most of the crop has not reached the phenological stem elongation stage.

The BAGE production estimates are a little more conservative than FAS. Their estimate of 19Mt off 6.5Mha is unchanged month-on-month despite the reported moisture stress and frost damage in the northern and central provinces. The good news side of the story is that the higher producing fields in the southern part of the country are in good shape and are countering the production losses further north for the moment. BAGE are pegging Argentine wheat exports at 12Mt for the 2021/22 marketing year, which commences on December 1.

The exchange is also calling this season’s barley crop 4.6Mt off 1.15Mha, up 12pc and 28pc, respectively. It is reported that growers in the south of the country, where 95pc of the nation’s barley is grown, have switched paddocks from wheat to barley this season on account of better returns per hectare. Higher yields, lower export taxes and access to the lucrative Chinese export market are the key drivers.

Shipping compromise

Meanwhile, export vessels departing the Argentine grains hub of Rosario on the Paraná River are having to reduce their cargoes by as much as 25pc due to extremely low water levels, and there does not appear to be any relief in sight with the headwaters forecast to stay dry for months. The ongoing drought in neighbouring Brazil, where the river originates, has slashed dam releases to a minimum leading to increased draft restrictions for export vessels.

The Paraná transports around 80pc of Argentina’s farm exports, and stream flows are at a 77-year low. This has seriously impacted shipments of the country’s key exports, including soybeans, soybean meal, wheat, barley and corn. It also comes at the peak of the Argentine row crop export season, and questions are mounting over the waterway’s ability to handle the nation’s winter crop export traffic late this year and into 2022.

The waterway also carries 90pc of Paraguayan and 50pc of Bolivian export trade as it is the most efficient avenue to global markets for the two landlocked nations. The drier than normal conditions are forecast to persist across southern Brazil for the next three months. If stream flows do not increase, the dead freight component on each export cargo could rise to as much as 40pc over the summer months.

The Argentine government has taken the drastic step of asking citizens to limit their water use for domestic and industrial purposes in a bid to relieve pressure on the river. According to the Rosario Grains Exchange, the low river flows will cost the country’s grain farmers around US$315 million in the six months to August 31 this year.

Confirmation of a return to a La Niña weather pattern in the Equatorial Pacific, as the southern hemisphere spring approaches, is not a good sign for Argentina’s winter crop prospects. The opposite to Australia, La Niña typically leads to below-average rainfall in Argentina. In August last year, the same weather pattern developed across Argentina, resulting in a dry finish which took the gloss off what had promised to be a well above-average season.

A winter crop disaster in Canada, lower US wheat production, a Russian crop heading south in a hurry, quality issues in the EU due to a wet harvest and now La Niña in Argentina leaves Australia the sweetheart of the wheat world right now. Wheat is a volcano on the verge of eruption, and Australia is well placed to reap the benefits this year.


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