Report Highlights:

Argentine wheat production for 2015/16 is forecast down at 10.2 million tons (mmt), 1.3 mmt lower than USDA. This is a result of an adjusted smaller area as the crop is unprofitable in most cases and to a lesser use of inputs. Exports are projected at 5 mmt, significantly lower than USDA official exports at 6.7 mmt. Barley production for 2015/16 remains unmodified. Non-feed use is set at 1.3 million tons, 100,000 tons lower than official USDA estimates. Corn production for 2015/16 is estimated at 21 mmt, 4 mmt lower than official USDA estimates. This is the result of a significantly lower area due to the lack of profitability and the challenge of selling production domestically. This output negatively impacts projected exports which are now set at 11.5 mmt, 4 mmt lower than USDA. Sorghum estimates remain unchanged. Rice production for 2015/16 is projected down to 1.25 mmt (rough production), 364,000 tons lower than official USDA estimates as farmers plan to cut area and only plant in fields with good production potential.

Background:

The 2015/16 Argentine crop continues to develop under great uncertainty. The Annual Grain and Feed report (March 2015) included the first forecast for the 2015/16 crop and Post already issued an alert on the complicated scenario local producers faced and difficulty and uncertainty to make planting decisions (at that moment they were beginning to harvest corn and soybeans). In general, the 2014/15 crop had high yields, but in most cases with negative economic returns. This was due to a combination of factors: significantly lower world commodity prices, high local inflation with a direct impact on production costs, a devaluation of the local currency lagging far behind inflation, high export taxes, domestic policy limiting exports (for corn and wheat), extremely high internal freight/transport costs, record high tax pressure, somewhat lower credit availability with higher interest rates, etc. To add to this situation, there will be presidential elections in October, with primaries in August. The leading candidates have expressed support to the agricultural sector (primarily removing export limitations and reducing export taxes case by case). However, in all cases it is unclear what policies will be implemented as of December 2015 when the new government takes office. Politics had little influence in winter crop decisions. In general, farmers planted based on current policies and economic conditions, having little or no expectations of change. Wheat planted area dropped 500,000 hectares from last year's planted area and barley area remained about the same. However, the October elections can have a strong influence on the planting decisions for the summer crops. If policies remain unchanged, Post envisions the potential of a strong shift from corn to soybean area. If friendlier policies are finally implemented Post envisions corn and soybean area remain relatively unchanged to 2014/15. Roughly 60-70 percent of Argentina´s crop area is produced on leased land. Most farmers, who typically own the equipment, are not in a good financial nor economic situation after the last 2-3 crop seasons, where returns were very tight or negative. Contacts indicate that approximately half of the farms are still not rented, and if farmers do not receive the right signals, Argentina's aggregate planted area in 2015/16 could drop between 5-10 percent.

Wheat:

Post estimates Argentine wheat production for crop 2015/16 at 10.2 million tons (mmt), 1.3 mmt lower than USDA´s official estimate. Yields could be somewhat lower than normal as most producers are reported to be using low technology (especially fertilizers) to reduce production costs. Another factor which could hurt yields and quality further is an expected rainy spring. Most local and international weather forecast services predict an El Nino for spring in Argentina, which normally results in excessive rain. Area is estimated at 3.7 mmt, the third lowest area since 1970, and 100,000 hectares lower than the official USDA estimate. Expected negative returns, difficulties to market production and large stocks have discouraged many producers to plant wheat. However, there are several reasons why some producers still plant. In the southern province of Buenos Aires, wheat is hands-down the best crop to produce, and over one third of Argentina's area planted to wheat is concentrated in this region. There is a possibility that policies could alter in the future with the change of government right at harvest time. Some prefer to maintain their crop rotation scheme, others prefer to maintain soil coverage during winter to control weeds, and still others believe that the combination of wheat plus second soybeans could be a good economic alternative. Through the end of July, a vast majority of wheat fields were in very good condition. Planting is expected to be finalized in early August.

Wheat exports for 2015/16 are estimated by Post at 5 mmt, 1.7 mmt lower than USDA´s official estimate. This is the result of Post´s expected lower output in 2015/16 and to a lower carry in from the previous year. Exports in 2014/15 are estimated at 5.5 million tons, 500,000 tons higher than official USDA estimates. In mid-July the local government authorized an additional 500,000 tons of low-protein wheat for export. This announcement will partially ease the situation of producers in southeast Buenos Aires province who have large stocks of wheat unsold with little or no demand from local flour mills. By the end of July 2015, the government had announced the export authorization of 4.2 mmt of wheat, plus 500,000 tons of low-protein wheat and 500,000 tons of wheat flour (equivalent to 650,000 tons of wheat) for a total of 5.35 mmt. The market believes that some more authorizations to export could be announced in October/November, closer to the beginning of the harvest season of the new crop.

Wheat

2013/2014

2014/2015

2015/2016

Market Begin Year

Dec 2013

Dec 2014

May 2016

Argentina

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

3500

3500

4200

4200

3800

3700

Beginning Stocks

288

288

2490

2490

3680

3180

Production

10500

10500

12500

12500

11500

10200

MY Imports

2

2

40

40

30

30

TY Imports

2

2

40

40

30

30

TY Imp. from U.S.

0

0

0

0

0

0

Total Supply

10790

10790

15030

15030

15210

13410

MY Exports

2250

2250

5000

5500

6700

5000

TY Exports

1675

1675

4000

4500

6200

4500

Feed and Residual

100

100

300

300

100

100

FSI Consumption

5950

5950

6050

6050

6050

6050

Total Consumption

6050

6050

6350

6350

6150

6150

Ending Stocks

2490

2490

3680

3180

2360

2260

Total Distribution

10790

10790

15030

15030

15210

13410

(1000 HA) ,(1000 MT)

Barley:

Post estimates Argentine barley production for 2014/15 at 2.8 mmt, 100,000 tons lower than official USDA estimates. Harvested area is also set lower than USDA at 800,000 hectares due to area losses mainly because of flooding in southeast Buenos Aires province, the country's primary barley production area. Total domestic consumption for crop 2015/16 is estimated at 1.45 mmt, 150,000 tons lower than USDA´s official volume. The local malting industry demands between 1.1-1.15 mmt and some 150,000 tons of barley is used for seed, totaling 1.3 million tons of non-feed domestic use. Feed barley use will ultimately depend on the quality of the crop and exports volumes. At this point, Post forecasts 150,000 tons of barley for animal feed use. However, if spring is very rainy, barley quality could be negatively affected, increasing the availability of poorer quality barley and thus serving as an alternate animal feed.

Barley exports for crop 2014/15 are estimated at 1.45 mmt, 50,000 tons higher than official USDA estimates. Traders expect exports of approximately 830,000 tons of malting barley and 620,000 of feed barley.

Carry out stocks for crop 2013/14 are adjusted down at 492,000 tons, 100,000 tons lower than USDA´s official estimate. Industry contacts believe carry out stocks were quite tight. Therefore, Post believes that feed consumption must have been higher than earlier expected.

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

950

Beginning Stocks

333

333

592

492

592

342

Production

4750

4750

2900

2800

3400

3400

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

3492

3292

3992

3742

MY Exports

2891

2891

1400

1450

2000

2000

TY Exports

2829

2829

1500

1550

2000

2000

Feed and Residual

300

400

200

200

200

150

FSI Consumption

1300

1300

1300

1300

1400

1300

Total Consumption

1600

1700

1500

1500

1600

1450

Ending Stocks

592

492

592

342

392

292

Total Distribution

5083

5083

3492

3292

3992

3742

(1000 HA) ,(1000 MT)

Corn:

Argentine exports for crop 2015/16 are estimated at 11.5 mmt, significantly lower than USDA's official estimates at 15.5 mmt. The main reason for this is the expected shorter export surplus as a result of a reduction in production now projected at 21 mmt, 4 mmt lower than official USDA estimates. Given current economic conditions, world commodity prices and domestic policies in place, Post estimates corn harvested area in 2015/16 at 2.8 million hectares, 300,000 hectares lower than official USDA area estimates. To date practically all crops have negative returns. In contrast with other commodities, corn (1) has the highest production cost, (2) faces high freight costs which have a significant negative impact on returns, (3) demands the highest investment per hectare, and (4) faces serious difficulties and limitations in the domestic commercialization which negatively affects farmer prices. Although there is still time (early corn is planted as of September, while late corn is planted in December), several policies could be modified to encourage corn production. If not, planted area could drop anywhere between 15 to 30 percent. If policies are modified to favor corn, we could see a late shift from soybeans to late corn which has become very popular in the past 3-4 crop seasons. Farmers in the northern part of the country normally plant more than 1 million hectares of corn because they have to rotate almost yearly with soybeans due to the strong pressure of weeds and insects. These farmers have had serious difficulties in the past 3-4 crop seasons due to weather and scarce market opportunities, and there are sizeable doubts about what they will decide regarding the new crop season. As an example, the current cost of transporting corn from Salta or Tucuman provinces to the port of Rosario is equivalent to 50 percent of the farmer's net income.

Corn harvested area for crop 2014/15 is now estimated at 3.3 million hectares, 300,000 hectares more than official USDA estimates. There is a significant divergence among local crop analysts on the final harvested area, with most contacts ranging between 3.1 and 3.45 million hectares. Almost record high yields, slightly above eight tons per hectare, are expected to produce a total 26.5 mmt, 1.5 mmt higher than USDA's official volume. Consistent high yields in almost all the corn producing areas are a result of excellent soil moisture, good radiation and almost perfect temperatures. However, late corn which is currently being harvested (to date over 75 percent of the total corn harvest is finished) is yielding above average, but somewhat lower than earlier expected.

Corn exports for 2014/15 are expected at 17 mmt, 1.5 mmt higher than official USDA estimates, and in line with a larger crop volume. The government has so far authorized 15 mmt (in two tranches) and indicated that it might open an additional volume in the future. The Argentine government stated that through mid-July 2015, exporters had purchased 13.4 mmt and shipped 9.2 mmt. Vietnam ranks as the first destination for Argentine corn, followed by Algeria, Indonesia and Malaysia. Local traders indicate that Vietnam has become the number one market as Vietnam's domestic needs have also increased due to a short production and a larger demand. Additionally, perhaps some Argentine corn then flows across Vietnam's border into China. Argentine corn exports directly to China are extremely slow, with the last large shipment (66,000 tons) logged in mid-2013. Local traders indicate that China has a limited TRQ to import corn.

Sorghum: After signing a sanitary protocol in late 2014, Argentine sorghum exports to China are moving slower than earlier expected. In our March 2015 report Post forecasted exports at 300-500,000 tons a year. Only a few shipments were exported in March-May 2015 for a total of 88,000 tons. Local traders have encountered difficulties in obtaining the sanitary certificates issued by the Argentine authority which pre-monitors each shipment. The protocol lists 25 weeds, which in a few cases present compliance barriers. Traders estimate that the total shipments of sorghum to China in 2014/15 could now range between 120-160,000 tons. Argentine sorghum is normally less expensive than that of the United States and Australia.

Rice: Argentine rice production for 2015/16 is now estimated at 1.25 mmt (rough production), the lowest in the last 6 crop years, and 364,000 tons lower than USDA's official estimate. Post estimates harvested area at 205,000 hectares, lower than official USDA estimates at 242,000 hectares. Very tight returns (in many cases negative), low farm prices, and large unsold stocks are making producers think of planting only in fields with high production potential to reduce risks of losing production via either flooding or low productivity. Contacts estimate that some 15-25,000 hectares could be left unsown in the coming season. Area is expected to drop in all provinces, including Corrientes and Entre Rios, the two most important producing provinces. In Santa Fe province producers are also facing severe competition from a weed called red rice. The possibility of a rainy and cloudy spring could negatively impact rice yields. The planting season is in October/November.

Rice exports for 2015/16 are projected at 500,000 tons (milled), 80,000 tons lower than official USDA estimates. This is a reflection of a lower expected production.

Post estimates 2014/15 production at 1.42 mmt (rough production). This volume is 131,000 tons lower than official USDA estimates. Most contacts in the local rice industry estimate production between 1.35-1.44 mmt. Lower rice availability is expected to impact exports. Post forecasts shipments at 450,000 tons, 140,000 tons lower than official USDA estimates. Traders are finding increased difficulties in selling Argentine rice abroad because of high local prices and due to the fact that Paraguay, Uruguay, Brazil and the United States are very competitive in world markets. Paraguay lately has displaced Argentine rice from Brazil and Bolivia.

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

3000

3300

3100

2800

Beginning Stocks

1308

1308

1408

1408

1513

1513

Production

26000

26000

25000

26500

25000

21000

MY Imports

2

2

5

5

5

5

TY Imports

1

1

5

5

5

5

TY Imp. from U.S.

1

1

0

0

0

0

Total Supply

27310

27310

26413

27913

26518

22518

MY Exports

17102

17102

15500

17000

15500

11500

TY Exports

12846

12846

18000

19500

15000

11000

Feed and Residual

5800

5800

6100

6100

6500

6500

FSI Consumption

3000

3000

3300

3300

3500

3500

Total Consumption

8800

8800

9400

9400

10000

10000

Ending Stocks

1408

1408

1513

1513

1018

1018

Total Distribution

27310

27310

26413

27913

26518

22518

(1000 HA) ,(1000 MT)

Sorghum

2013/2014

2014/2015

2015/2016

Market Begin Year

Mar 2013

Mar 2014

May 2016

Argentina

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

1000

1000

800

800

1000

1000

Beginning Stocks

781

781

1202

1202

502

502

Production

4400

4400

3500

3500

4500

4500

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

5181

5181

4702

4702

5002

5002

MY Exports

1279

1279

1400

1400

1800

1800

TY Exports

953

953

1500

1500

1700

1700

Feed and Residual

2300

2300

2400

2400

2500

2500

FSI Consumption

400

400

400

400

400

400

Total Consumption

2700

2700

2800

2800

2900

2900

Ending Stocks

1202

1202

502

502

302

302

Total Distribution

5181

5181

4702

4702

5002

5002

(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

225

242

205

Beginning Stocks

227

227

359

359

342

427

Milled Production

1027

1027

1008

923

1050

813

Rough Production

1580

1580

1551

1420

1615

1251

Milling Rate (.9999)

6500

6500

6500

6500

6500

6500

MY Imports

5

5

5

5

5

5

TY Imports

6

6

5

5

5

5

TY Imp. from U.S.

0

0

0

0

0

0

Total Supply

1259

1259

1372

1287

1397

1245

MY Exports

465

465

590

450

580

500

TY Exports

494

494

560

450

580

500

Consumption and Residual

435

435

440

410

440

410

Ending Stocks

359

359

342

427

377

335

Total Distribution

1259

1259

1372

1287

1397

1245

(1000 HA) ,(1000 MT)