Winter drought rolls into third La Niña for Argentina

Grain Brokers Australia, September 20, 2022

Despite dry conditions, planting of Argentina’s summer crop has started. Photo: Diego Garcia Alvarez

THE PROSPECT of another La Niña weather pattern does not bode well for Argentina’s 2022-23 season grain production, especially following one of the worst winter droughts in three decades. Every La Niña is different, and crop production effects are not predictable, but entering spring with an extremely poor soil-moisture profile and the days beginning to heat up is not a good start. While there is still plenty of time for the required rains to arrive for the summer-crop planting season, it will make it extremely difficult for winter-crop production to recover.

Crop conditions in Argentina appear to be going from bad to worse with much of the country’s farming zones facing the worst drought in around 30 years. Wheat farmers in some regions are reportedly abandoning hope of any production this season, and the summer-crop plant is stalled while farmers wait for sufficient rain.

September announces the start of spring in Argentina, and it usually heralds wetter weather to finish the winter crop and plant the summer crop. However, the forecast for a third straight La Niña weather pattern in 2022 is expected to limit precipitation for the balance of the year. Typically, La Niña leads to hot and dry conditions for Argentina.

The likelihood that the cooling of the equatorial Pacific will linger through October has risen to 97 per cent, according to the latest forecast from the United States Climate Prediction Centre. And the chances of La Niña hanging around through to the end of January are now 80pc.

Arid, not rosy

This would spell disaster for grain production in Argentina this season, with concerns growing amongst industry participants, analysts and meteorologists that Argentina will see a repeat of the 2008-09 season, commonly referred to as the “great drought”. The arid conditions throughout winter and early spring have also led to a string of frosts in recent weeks, but they are too early to have a huge impact, and losses appear to be limited at this stage.

The Buenos Aires Grain Exchange (BAGE) released its latest crop update on September 15, and the picture it painted was not rosy. More than one-third of the wheat area, or 34pc, was in the poor-to-very poor crop condition category. This was up from 26pc just a week earlier and 22pc at the same time last season. Only 15pc of the wheat area made the good-to-excellent category, down from 17pc in the first week of September and 50pc in early September last year.

The soil-moisture data paints a similar picture, with 46pc of the wheat crop sitting in the poor-to-dry category against 35pc last week and 30pc in 2021-22. The wheat crops are so bad in some regions, particularly in the country’s north, that the crops are dying. In other areas, farmers are likely to spray them out and plant to summer crop if sufficient and timely spring rain arrives.

Argentina is coming off record wheat production of 22.4 million tonnes (Mt) in the 2021-22 season. The harvested area was 6.7 million hectares giving an average yield of 3.34 tonnes per hectare. According to BAGE, the planted area is already back by 9pc to 6.1 million hectares, but it is yet to release a formal production estimate. The final wheat area from the Rosario Grains Exchange (BCR) was even lower at 5.9Mha.

The severity of this season’s drought and the current long-term forecast suggests a 20pc reduction in yield compared to last year is probably conservative. Nonetheless, that would be a yield of 2.67t/ha and would result in wheat production in the range of 15.8Mt, using the BCR area, to 16.3Mt if applied to the BAGE area. With domestic consumption running at around 6.4Mt and assuming no change to ending stocks, exports could be as low as 9.4Mt.

The team at the USDA still have their blinkers on, leaving Argentina’s September wheat production estimate unchanged at 19Mt. Local Argentinian forecasts have been under 18Mt for more than two months, and the crop has undoubtedly deteriorated in the intervening period. There will also be a significant export hole to plug, with the USDA expecting shipments of 13Mt in the 2022-23 marketing year.

Summer-crop bleak

The corn-planting season has arrived for the Pampas plains of Argentina, but many of the row-cropping regions have seen little to no rain in more than four months. With Northern Hemisphere production issues in Europe and the United States, and reduced export volumes out of Ukraine, the global consumer is banking on big South American crops. As the world’s third-largest exporter of corn, Argentina is desperately hoping to cash in on the tightening supply outlook.

But Argentina needs to get its crop in the ground, and the chance of a timely plant for the early crop is not looking good. And it is not only lack of soil moisture that is the problem. It has also been a cold winter in Argentina, and below-normal temperatures have continued into early spring. This has slowed the rise in soil temperature to the desired 10 degrees Celsius planting threshold, further delaying the planting program.

The Argentinian corn crop is planted in two phases – the first in September and October and the second in December and January. Argentine farmers typically avoid planting corn in November, so the crop is not flowering in the hottest part of the summer. It also spreads production risk across the summer. The past two La Niña weather patterns pushed a larger-than-normal proportion of the crop into the second window, and this year is likely to be a repeat.

Planting of Argentina’s soybean crop generally begins later than corn, with seeding commencing in late October and running through to the end of December. The biggest concern is for the double-crop area. The late plant followed by cold conditions throughout the winter and early spring have slowed wheat development. This will ultimately delay maturity and harvest, pushing planting dates for the subsequent soybean crop back to late summer.

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