Row-crop production concerns build in Argentina…

By Peter McMeekin

The rainfall across much of Argentina’s summer cropping belt has been well below average since November, and the country’s farmers desperately require substantial widespread falls to boost soil moisture reserves, relieve plant stress and arrest production declines that have already started in many regions.

Argentina received heavy rains at the onset of the row crop seeding program, with November registrations around 30 per cent above the long-term average. The early soybean and corn crops were planted into good moisture, with excellent germination and plant establishment in most regions.

However, rainfall has been running well below average across much of the country ever since, with soil moisture declining rapidly and crop stress evolving just as quickly. The earlier planted crops with longer root systems may be able to draw some water from the subsoil, though plant available moisture at depth is also decreasing. The topsoil is too dry to support plant establishment and early season growth for the recently planted crops, substantially increasing production uncertainty and supporting underlying futures values.

The dry pattern is not surprising given the development of a La Niña weather event in recent months. A La Niña event occurs when the sea surface temperatures in the South Pacific Ocean fall more than half a degree Celcius below normal, leading to hotter and drier conditions in South America, particularly in the south of the continent. La Niña-induced dry spells have recently damaged multiple Argentine row-crop harvests, most notably in 2023 which saw the smallest soybean harvest this century.

Many of the major forecasting models were in broad agreement that extensive rainfall would arrive over the weekend to provide some reprieve to the hot and dry conditions experienced over the past six weeks. But on the whole, they disappointed, with the falls very patchy and much less than forecast across much of the country’s row-cropping area.

The models are predicting a return to the dry weather pattern for much of the country for the balance of January, which does not bode well for crop yields. Argentina's worst soybean harvests have a strong correlation with its driest Januarys. Good rainfall in February can rescue some of the yield loss, but a full recovery is improbable.

According to the latest weekly agricultural report from the Buenos Aires Grain Exchange released on January 15, soybean seeding had covered 98.2 per cent of its 18.4 million hectare forecast, an advance of 1.2 percentage points across the preceding week. BAGE rated 32 per cent of the soybean crop as good to excellent, down from 49 per cent a week earlier and 40 per cent for the same time last year. At the other end of the scale, 21 per cent of the crop area fell into the poor to very poor category, up from just 8 per cent last week and 9 per cent 12 months ago.

Demonstrating just how desperate the crop is for rain, 40 per cent of the soybean area had a moisture condition rating of poor to dry up from 23 per cent on January 7 and 8 per cent in mid-January 2024. The optimum to favourable moisture rating fell from 77 per cent to 60 per cent week-on-week, well down on the 92 per cent rating at the same time in 2024. None of the planted soybean areas were rated as wet.

On the corn front, the 6.6 million hectare corn program was around 95.1 completed by January 15, according to BAGE, with around 300,000 hectares in the northern agricultural area yet to be planted. The good to excellent proportion of the total planted area dropped three percentage points over the week to 39 per cent against 46 per cent a year ago. Conversely, the poor to very poor area jumped from 9 per cent on January 7 to 14 per cent on January 15 and 3 per cent this time last year.

Unsurprisingly, the soil moisture ratings of the corn-cropped area slipped 13 percentage points week-on-week to be 64 per cent optimum to favourable, well down on the 92 per cent 365 days earlier. The poor to dry area increased by the same amount to 36 per cent against just 5 per cent at the same time last year. Production estimates from BAGE currently sit at 50.6MMT and 50MMT for soybeans and corn, respectively, against 50.2MMT and 49.5MMT last year.

The Rosario Grain Exchange updated its 2024/25 row crop production numbers on Wednesday of last week. It cut its corn output estimate to 48 million metric tonne off a harvested area of 6.5 million hectares, down from its previous guidance of between 50 and 51MMT. The exchange pointed to extreme temperatures, low relative humidity and high levels of solar radiation as the main reasons behind its sharp forecast reduction, adding that these factors “have aligned negatively at the most critical moment for early corn.”

RGE also sees soybean output falling short of its December 2024 forecast of between 53 and 53.5MMT but did not specify an updated figure. The exchange noted that the rainfall deficiency that had affected Argentina's agricultural core for the past month will affect soybean yields, making them rule out "the high productivity scenarios that were considered until recently." The second crop program, those areas planted into wheat stubble immediately after harvest, is particularly compromised having started life in totally depleted soil moisture reserves.

Highly respected row-crop analyst Michael Cordonnier holds a far more optimistic soybean outlook of 52MMT, down 1MMT week-on-week, however, his bias is neutral to lower. This is in line with the USDA’s most recent number. Cordonnier noted that the core row-crop areas of northern Buenos Aires and southern Santa Fe provinces had been hit the hardest by the dry weather, with the crops in those regions entering their critical reproductive phase and in desperate need of at least 25 millimetres of rain to maintain adequate growth. 

Cordonnier also holds a neutral to lower production bias for Argentina’s corn crop, clipping 1MMT off his estimate last week to currently stand at 49MMT. This is substantially lower than the USDA, which maintained its 51MMT forecast in its January global supply and demand update. The dry weather this summer has reportedly had a greater impact on corn potential than soybeans, with any paddocks planted since the beginning of November the hardest hit.

As the world’s leading exporter of soybean meal and soybean oil, and the third largest international supplier of corn, the global trade is particularly concerned with Argentina’s dry weather outlook, falling crop ratings and declining production potential. Corn and soybean futures markets took a breather for most of last week, largely in anticipation of good weekend precipitation. The failure to materialise could quickly put a fire under bourse values this week.

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