Report Highlights:

Post projects Argentine wheat production for 2017/18 at 16.8 million tons, 700,000 tons smaller than USDA due to a significantly lower harvested area. Excess rain during the planting and growing seasons will negatively affect the harvested area. This is forecast to cut potential exports, projected at 10.8 million tons, to 700,000 tons lower than USDA. Barley production and exports in 2017/18 remain practically unchanged from USDA’s official data. Post projects corn production for 2017/18 at 40 million tons, 2 million tons lower than USDA because of a smaller area. Some producers could shift marginal corn area into soybean production due to the recent changes in relative prices between soybeans and corn. Rice area and production for 2017/18 is expected to drop due to excessive rain, which is delaying plantings in the main provinces, and thin returns.

Wheat:

Post estimates Argentine marketing year (MY) 2017/18 wheat harvested area at 5.2 million hectares, 400,000 hectares lower than USDA and production at 16.8 million tons, 700,000 tons lower than the official number. This difference is primarily justified by a final lower planted area and the loss of 150-200,000 hectares due to flooding. The local wheat crop has so far developed in very wet conditions. The planting season began with excess soil moisture, with many lots not being able to be planted. Winter, typically a dry season in Argentina, was very humid and temperatures were milder than normal, with very few frosts. Currently the general condition for wheat is good, although there are some doubts about the final quality which will depend on how high yields are and how effective was the application of fertilizers as continued rains could have leached out part of the applied nutrients. Most producers have been able to control effectively insect and disease attacks. Wheat harvest has slowly begun in Northern provinces with yields somewhat lower than earlier expected.

Post concurs with USDA’s wheat production for MY 2016/17 which was increased in the October WASDE report to 18.4 million tons, the same volume reported by the Argentine Ministry of Agriculture. Although locally there is still discussion on the level of production, the high volume of exports in MY 2016/17, estimated at 13.0 million tons (including flour), would indicate there was more wheat available than estimated earlier. There are some local analysts who believe production was lower but beginning stocks were higher than those reported by USDA but finally come up with a similar total supply.

Exports in MY 2017/18 are projected at 10.8 million tons, 700,000 tons lower than USDA. This is a reflection of Post’s expected smaller output. Through mid-October, local exporters reported purchases of around 3.8 million tons of the new crop. The harvest of the new crop will be in full swing in the last part of November. Local exporters are expecting to increase wheat (and flour) shipments to Brazil in MY 17/18 due to the neighbor’s smaller wheat crop and also to lower exports from Paraguay. Argentine exports to Brazil in MY16/17 will total 5.0/5.2 million tons of wheat and about 360,000 tons of wheat flour. Exports of wheat flour to Bolivia have also been significant in the current marketing year, with an estimated total export volume of about 300,000 tons. In early October, the Government of Argentina announced that the country will ship for the first time 30,000 tons of wheat to Mexico in December. The two countries recently agreed upon phytosanitary conditions.

Post has carried 100,000 tons higher stocks than USDA since MY 2015/16 as we set exports that year at 9.5 million tons, 100,000 tons lower than USDA. Ending stocks in my 2016/17 are estimated to be tight, as local spot prices are paying a premium of $10 per ton against January 2018 prices. Contacts in the southern part of Buenos Aires province, the country’s main wheat area, report that there are not many stocks in the area.

Barley:

Post concurs with USDA’s current supply and demand table. The only minor difference is that Post estimates exports in MY 2016/17 at 2.6 million tons, 100,000 tons lower than USDA (exports from December 2016 through October 2017 are estimated at 2.5 million tons). To date the 2017/18 crop is in general in very good condition (especially in the southern part of Buenos Aires province). However, some contacts indicate that, as in wheat, we will need to wait to see the final quality of the crop. If yields are on the high side and the excessive rain washed some of the fertilizer applied it could result in some quality problems for the malting industry. Barley prices are currently higher than projected when farmers planted. There is a firm international demand for both malting and feed barley. Traders indicate that a smaller crop in Australia is firming up prices. Ending stocks for 2016/17 and 2017/18 are projected a minimum technical volume of about 200,000 tons. Buenos Aires

Corn:

Post projects harvested area in MY 2017/18 at 5.0 million hectares, 200,000 hectares lower than USDA. This is also a reduction of Post’s previous estimate which reflected a 6 percent increase from last year. The expansion is now forecast at 2 percent. This small reduction in area is a result of the recent relative price change between corn and soybeans. There are several thousand hectares which today are either with some degree of flooding or with wet soils which will need to dry up before the planting season of the summer crops is over. Some of this area was earlier expected to be planted with corn due to its higher returns. However, in the past 3 months and a half local future soybean prices increased 6 percent while corn prices dropped 3 percent. In most cases, where corn is close to ports or close to consumption centers, corn is still more profitable than soybeans, but the profitability gap has gotten significantly smaller. Also, corn production costs are 50 percent higher than those of soybeans. Producers farming on their own land will most likely continue with the projected rotation, while those who lease land, will be more inclined to plant somewhat more soybeans under current market conditions. For every two hectares of corn, producers can plant three hectares of soybeans. A drop in area in MY 2017/18 will negatively impact corn projected output, which Post forecast at 40.0 million tons, 2.0 million tons lower than USDA.

Exports and consumption in my 2017/18 are forecast at 29.0 million tons and 12.5 million tons respectively, the same as USDA. The final export volume will depend on FOB prices and if farmers are willing or needing to sell. The possibility of stocking large volumes of corn in silo bags allows farmers to manage their sales throughout the whole year. In the current crop, local official and private banks are offering credits to farmers with very low interest rate in dollar terms, making some producers take those credits and retain some of their crop production in the belief that commodity prices will increase over the next few months.

Ending stocks in MY 2017/18 are forecast at 4.5 million tons, 1.5 million tons lower than USDA primarily due to a projected lower production and larger estimated beginning stocks. Ending stocks for 2016/17 are a great doubt (the market estimates range between 5-10 million tons) which will depend on the final export volume. Post currently concurs with USDA’s volume of 25.5 million tons exports for MY 2016/17, but there are traders and analysts who think they could vary significantly. Exports from March through October 2017 are estimated at 19.5 million tons. Half of Argentina’s corn production now comes into the market in June/August (from the late planted corn), which coincides with Brazil’s harvest and then with the US’ production. Argentine corn exports are currently facing strong competition from Brazilian product. Traders indicate that at current market conditions, they lose money exporting corn. Exports in November and December are expected to be on the low side. Some traders believe that exports in January/May 2018 will be significant due to the large carry over from the 2016/17 crop and an abundant new crop coming in as of March. At this time of the year, Argentina has a window in which the export competition decreases significantly.

Sorghum:

Post proposes no changes to USDA’s official supply and demand table. Exports from March through October 2017 are estimated at 330,000 tons.

Rice:

Argentine rice harvested area for MY 2017/18 is projected at 185,000 hectares, 15,000 hectares lower than USDA. This is due to the combination of two main factors: 1) excessive rain prior and during the planting season which is delaying significantly the sowing (to date, Corrientes planted roughly 50 percent of the area, while Entre Rios only 30 percent, half of what it is normally covered). Efficient producers will not plant beyond the end of the optimal date (early November); therefore, contacts estimate that several thousand hectares will not be planted. Planted area in Chaco, Santa Fe and Formosa is expected to remain relatively unchanged; and 2) higher energy costs which in some cases, especially Entre Rios province, are making producers plant other alternatives. Producers report that returns under current market conditions are very thin, almost breakeven. Therefore, rice production for the new crop is projected at 1.2 million tons (rough production), equivalent to 782,000 tons (milled basis) and practically 100,000 tons lower than USDA. Several weather forecasts are predicting normal to drier weather in the summer and fall. This is normally quite beneficial for rice production.

A lower output is not expected to affect the export surplus, which is forecast to remain at about 450,000 tons (milled basis). Domestic use is forecast at 460,000 tons (milled basis), smaller than what USDA estimates.