Report Highlights:

Post estimates wheat production for 2015/16 at 10.8 million metric tons (MMT), 300,000 tons higher than USDA. Although yields were higher than normal, the protein content of a large share of the production is low. Exports are forecast at 6.5 MMT, 500,000 tons higher than USDA primarily due to the production increase. Barley production for 2015/16 is estimated at 4.3 MMT, significantly higher than USDA's 3.4 MMT as result of excellent weather during the entire cycle which produced almost record yields. Larger production is expected to increase exports at 2.4 MMT (USDA at 2.0 MMT) and increase ending stocks. Post projects 2015/16 corn production at 24 MMT, 1.6 MMT lower than USDA, primarily due to a smaller harvested area. Crop condition was very good so far, but lately the lack of rains and high temperatures are affecting the crop condition in some areas. Post projects corn exports at 14.2 MMT, 1.8 MMT lower than the official number as Post projects a smaller corn supply. Sorghum exports for 2015/16 are forecast at 1.0 MMT, 100,000 tons lower than USDA. Local traders indicate that the demand is slow. Rice production for 2015/16 is expected at 1.262 MMT (rough basis) due to excess rain which has made farmers lose some 9,000 hectares planted.

Background: Policy Changes Under New Macri Government

Soon after the accession of President Maurico Macri on December 10th, his administration implemented a series of significant policy changes in the agricultural sector, affecting the entire grain and oilseed sector in Argentina. These changes included the reduction of the export tax on soybeans and its byproducts by 5 percentage points and eliminating export taxes on all other agricultural commodities. Agricultural commodities with a new zero percent export tax include meat products, grains, fruits, and vegetables among other products. Soon after that, the Macri administration eliminated export permits (ROEs) for grains and oilseeds. This dropped the pre-approval requirement for export sales and eliminates an intrusive control on the flow of grain, particularly wheat and corn. Along with these political changes, came the removal of foreign exchange restrictions and devaluation of the Argentine peso by about 45 percent on December 17th. This boosted the competiveness of agricultural exporters and was a positive signal to producers who waited for such an adjustment to occur before they began liquidating their inventories. In the short term, these changes are expected to spur an increase in the sales of Argentine agricultural commodities, primarily corn and wheat, on the world market as producers move forward with sales that have been held up in anticipation of policy changes. In the medium to long term, these changes are expected to significantly improve farmers' returns (which in many cases were negative before the new policies were implemented) and are expected to encourage wheat and corn planting for the 2016/2017 season and beyond.

Wheat

Post estimates Argentine wheat production for crop 2015/16 at 10.8 million metric tons (MMT), 300,000 tons higher than USDA's official volume. Harvest is expected to finalize this week. Despite a lower use of technology, especially fertilizers, very favorable weather in the last few months of the production cycle more than offset an earlier estimation of average or somewhat lower yields. In general good soil moisture, lower than usual crop diseases attacks and abnormally cooler weather (in November and December) during the grain filling stage resulted in heavier grains and higher yields than normal in most of the key wheat production areas. In contrast, the average quality of the wheat produced is poorer than expected, with lower protein content than desired. Brokers indicate that there is a large volume of wheat below 10% of protein. Most of the higher quality wheat was purchased by exporters which need to comply with their contracts. Feed wheat will also be exported. Local exporters are offering for delivery in southern Buenos Aires ports US$180 per ton for 10.5% protein wheat, US$160 for 10% protein wheat and US$145 for lower than 9.5% protein wheat. Current prices are not yet showing the full price which traders could pay after the elimination of the export tax and export quotas in December 2015. Traders indicate it is mainly because low quality problems. Farmers are not eager to yet sell their wheat and are waiting for Brazil to become more active (normally in May-June of each year). Local wheat mills are expected to have to use somewhat lower quality wheat this year. With the new policies in place and after the devaluation, mills are currently buying the higher quality wheat at pesos 2800 per ton (or US$200 per ton), more than double of last year in peso terms. Many mills made large purchases in the last few months of 2015 in anticipation of the new policies and their impact.

Exports of wheat for 2015/16 are now set at 6.5 million tons, 500,000 tons higher than USDA. This additional volume is from a new higher production estimate and a larger carry in from the 2014/15 season as exports will finally be 5.2 MMT, 300,000 MT shorter than expected by USDA. Currently Argentina is competitive exporting low-priced wheat to Egypt (120,000 tons in January), Vietnam, Indonesia, South Korea, Thailand, Morocco and Brazil. It has also shipped two cargoes of feed wheat for a total of 39,000 tons to North Carolina for feed. Since the export taxes were eliminated late last year, around 1 million tons of wheat exports have been declared to be shipped during this time. Exports of wheat flour have historically been a little below 1 million tons per year, with Brazil taking 70 percent of it, followed by Bolivia. However, due to official policies, exports in 2013-15 dropped to an average of 300,000 tons of flour per year. With the new government and its policies in place, we believe this market will recover quite rapidly.

Although volumes are difficult to estimate, Post believes that that the local use of wheat for animal feed will remain higher than normal in 2015/16. The low quality crop in 2015/16, large volumes of wheat stocks from the previous two crop seasons which have quality problems as well, and expensive corn will most likely encourage some producers to use some wheat as animal feed.

Ending stocks for 2015/16 are now projected at 1.45 MMT, slightly below USDA. A free export market is expected to result in ending stocks more in line with historic levels.

Barley

Post estimates Argentine 2015/16 barley production at 4.3 MMT, 900,000 MT higher than USDA's official number. There is great variation in production estimates ranging from 4.0 to 4.8 million tons of production. Post adjusts harvested area at 980,000 hectares, 30,000 hectares higher than USDA (some 150,000 hectares were lost due to excess rain during planting season). As in wheat, the weather in the main barley production areas was very good, resulting in higher than normal yields. There was good soil moisture throughout the production cycle, cool weather at the end of the growing season, and good conditions during harvest. Famers also used good crop protection management. The use of new high yielding barley varieties also helped quite significantly. Just a few years ago, Scarlett variety was used in more than 70 percent of the area, but it currently represents only 15 percent of total plantings. This variety has been in the market quite a long time and has had serious disease problems in the past 2-3 crop seasons. The new varieties used, such as Andreia and Shakira, developed by a multinational beer company, are high yielding and are well demanded by the beer industry. As in wheat, high yields and lower fertilizer use has negatively affected the protein content and large volumes of barley will be sold (exported) for feed purposes.

With the new level of production, Post projects barley exports for crop 2015/16 at 2.4 MMT, 400,000 tons higher than USDA. Local traders project roughly 800,000 MT of exports of malting barley for regional customers which every year demand a similar volume. The rest of the exports will be feed barley. Although exporters indicate that foreign demand is slow, more than 700,000 tons of feed barley was already contracted and most of it is being shipped at this time. Argentine feed barley prices are currently very competitive. Saudi Arabia, China, Brazil are the leading destinations. Exports for 2014/15 are set at 1.59 MMT, 90,000 tons higher than USDA.

Ending stocks for crop season 2015/16 are at 652,000 tons, 360,000 tons higher than USDA's official number. Local exporters doubt that they will be able to export the entire export surplus as the world market is slow because it is well supplied by other world producers.

Corn

Post estimates Argentine corn production for crop season 2015/16 at 24 MMT, 1.6 MMT lower than USDA's official number. This difference is result of Post estimating a lower harvested area and a slightly lower average yield. The planting is over 95 percent complete, only missing some fields in the northern part of the country where normally planting is done somewhat later. Four months ago, just at the time the first early corn fields were planted, the market was estimating a drop in area between 20-40 percent. This estimate was during the middle of the presidential election with a lot of uncertainty of who the future president could be and thus what policies could be implemented. With the election of President Macri in a run off in late November, things began to change in the local farm sector as the new president promised to support the agricultural sector by eliminating export taxes (except for soybeans which decreased 5 percentage points) and export quotas and devaluing the local currency to reflect a more realistic exchange rate. As noted above, these changes were implemented in December.

The new policies improved significantly corn returns which went from negative to positive, and made corn profitability significantly higher than planting soybeans. While these changes have resulted in a larger area than initially estimated, they came too late to fully offset the reduction. Post currently estimates harvested area for 2015/16 at 3.05 million hectares, 150,000 hectares less than USDA. Practically all analysts expect a drop in area from last year, ranging from 5-15 percent.

Until ten days ago the crop condition was very good in almost all areas. However, in the northeastern part of Buenos Aires province and southeastern part of Santa Fe province, an important corn area, corn fields are suffering a significant drought together with some days with extreme high temperature which will negatively affect yields on early planted corn. Immediate rain is necessary in a significant and important corn area to stop further damage. Most technicians indicate that if rains resume over the next 10 days the situation would be normalized. Weather forecasts indicate that February and March will bring good rainfall. However, this year's El Nino, which normally results in excess rain in Argentina's main crop producing area, has been very erratic and less positive in yields in several producing areas. Also an important factor to monitor is that Argentina is facing the worst locust attack in 60 years. The official sanitary service is very active in spraying the areas where the worst takes place, forest land in Santiago del Estero province. The goal is to control this plague rapidly before it turns into a flying throng which could then seriously affect crops and pastureland. So far, corn planted for silage (normally estimated between 800,000-1,000,000 hectares) for cattle feed is yielding somewhat above average. When this happens, most producers prefer to harvest the volume of silage they had originally budgeted and leave the surplus area for harvest as commercial corn.

Post increases corn production for 2014/15 crop season to 27.0 MMT, 500,000 tons higher than USDA. The main reason is the excellent weather during the whole crop cycle which covered a large area where corn plantations where located. Yields were almost record high. Post continues to estimate harvested area at 3.3 million hectares, 100,000 hectares more than USDA.

As result of Post having a lower 2015/16 production estimate than USDA, Argentine corn exports are projected at 14.2 million tons, 1.8 MMT lower than the official volume.

Argentine corn exports for the 2014/15 crop are very active; with a large increase in shipments since the removal of export restrictions in December. Traders indicate that exports for 2014/15 crop will total around 18.3 MMT, 800,000 tons more than USDA. This is the result of a strong foreign demand which is being supplied with a larger than expected production and smaller ending stocks than earlier projected. Current FOB prices are quite good and producers react to such prices by selling. Main destinations are Saudi Arabia, South Korea, Indonesia, north of Africa and Chile.

Sorghum

Post projects sorghum exports in 2015/16 at 1.0 MMT, 100,000 tons lower than USDA. Post estimates the same for 2014/15. Traders indicate that sorghum exports are quite slow, especially after the halt of exports to China, which had brought a lot of enthusiasm in the local market. Post projects sorghum domestic consumption to be 100,000 tons higher than USDA's official number as a well-supplied market, low exports and strong corn prices could encourage livestock producers to increase its consumption.

Rice

Post estimates Argentine rice production for crop 2015/16 at 1.262 MMT (rough basis), 169,000 tons lower than USDA. This is primarily due to a smaller harvested area. El Nino has created significant problems in the northern part of the country with heavy rains, resulting in the breaching of rice-field ponds, and to the over flooding of several rivers bringing water from Brazil and Paraguay which have also received more rain than normal. The country's planted area in 2015/16 totaled 211,000 hectares, but so far there were losses of 4,000 hectares in Corrientes, 3,000 hectares in Santa Fe and 2,000 hectares in Entre Rios. In the past several weeks it has not rained and more sunlight than expected under El Nino conditions has improved the crop condition. Nonetheless, most contacts expect average yields to be somewhat lower than normal. The harvest has begun in the northern part of the country.

Wheat

2013/2014

2014/2015

2015/2016

Market Begin Year

Dec 2013

Dec 2014

Dec 2015

Argentina

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

3500

3500

4200

4200

3500

3500

Beginning Stocks

288

288

2490

2490

3175

3475

Production

10500

10500

12500

12500

10500

10800

MY Imports

2

2

35

35

30

30

TY Imports

2

2

35

35

30

30

TY Imp. from U.S.

0

0

0

0

0

0

Total Supply

10790

10790

15025

15025

13705

14305

MY Exports

2250

2250

5500

5200

6000

6500

TY Exports

1675

1675

4200

4200

6500

6500

Feed and Residual

100

100

300

300

100

300

FSI Consumption

5950

5950

6050

6050

6050

6050

Total Consumption

6050

6050

6350

6350

6150

6350

Ending Stocks

2490

2490

3175

3475

1555

1455

Total Distribution

10790

10790

15025

15025

13705

14305

(1000 HA) ,(1000 MT)

Barley

2013/2014

2014/2015

2015/2016

Market Begin Year

Dec 2013

Dec 2014

Dec 2015

Argentina

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

1270

1270

900

800

950

980

Beginning Stocks

333

333

492

492

392

252

Production

4750

4750

2900

2850

3400

4300

MY Imports

0

0

0

0

0

0

TY Imports

0

0

0

0

0

0

TY Imp. from U.S.

0

0

0

0

0

0

Total Supply

5083

5083

3392

3342

3792

4552

MY Exports

2891

2891

1500

1590

2000

2400

TY Exports

2829

2829

1598

1598

2000

2400

Feed and Residual

400

400

200

200

200

200

FSI Consumption

1300

1300

1300

1300

1300

1300

Total Consumption

1700

1700

1500

1500

1500

1500

Ending Stocks

492

492

392

252

292

652

Total Distribution

5083

5083

3392

3342

3792

4552

(1000 HA) ,(1000 MT)

Corn

2013/2014

2014/2015

2015/2016

Market Begin Year

Mar 2014

Mar 2015

Mar 2016

Argentina

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

3400

3400

3200

3300

3200

3050

Beginning Stocks

1308

1308

1408

1408

1113

813

Production

26000

26000

26500

27000

25600

24000

MY Imports

2

2

5

5

5

5

TY Imports

1

1

3

3

5

5

TY Imp. from U.S.

1

1

0

0

0

0

Total Supply

27310

27310

27913

28413

26718

24818

MY Exports

17102

17102

17500

18300

16000

14200

TY Exports

12846

12846

18447

18447

17500

15000

Feed and Residual

5800

5800

6000

6000

6300

6300

FSI Consumption

3000

3000

3300

3300

3500

3500

Total Consumption

8800

8800

9300

9300

9800

9800

Ending Stocks

1408

1408

1113

813

918

818

Total Distribution

27310

27310

27913

27913

26718

25118

(1000 HA) ,(1000 MT)

Rice, Milled

2013/2014

2014/2015

2015/2016

Market Begin Year

Apr 2014

Apr 2015

Apr 2016

Argentina

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

241

241

231

228

215

202

Beginning Stocks

227

227

359

359

548

524

Milled Production

1027

1027

1014

990

930

820

Rough Production

1580

1580

1560

1523

1431

1262

Milling Rate (.9999)

6500

6500

6500

6500

6500

6500

MY Imports

5

5

5

5

5

5

TY Imports

6

6

7

5

5

5

TY Imp. from U.S.

0

0

0

0

0

0

Total Supply

1259

1259

1378

1354

1483

1349

MY Exports

465

465

400

400

520

520

TY Exports

494

494

325

325

480

480

Consumption and Residual

435

435

430

430

430

430

Ending Stocks

359

359

548

524

533

399

Total Distribution

1259

1259

1378

1354

1483

1349

(1000 HA) ,(1000 MT)