Oil World Slashes Argentine Wheat Acreage Estimate
Oil World now predict that Argentine farmers will plant just 2.8 million hectares of wheat this season. That is down sharply on their forecast last month of 3.6 million hectares, and a gigantic 39% drop on last year. It is also 400,000 hectares beneath the last figure from the Buenos Aires Grain Exchange, although they did warn that things were likely to get worse not better.
Not only has the country been hit by the worst drought for 70 years, which has now lasted eighteen months, but there are also huge financial disincentives to plant wheat.
The way things look right now the world's fifth largest wheat exporter just a couple of years ago won't even be self-sufficient in wheat in 2010.
It's a Catch 22 situation, the more farmers cut back on wheat plantings, the more likelihood there is that there will be no wheat export licenses granted at all for 2009/10, therefore the lower the incentive to plant.
This leaves President Cristina Fernández de Kirchner in an interesting position, as she recently struck a deal with wheat exporters to get them to buy a million tonnes of old crop wheat, in exchange for guarantees that the government would issue export licenses for a million tonnes of wheat in the next marketing year.
The move was supposed to stimulate new crop plantings, but has clearly failed. Will she stand by her word and allow a million tonnes of wheat out of the country in the next marketing year, knowing that they don't have enough to cover their own domestic requirements?
"Even if it does rain, most farmers are looking at alternate grains such as oats, barley and any other product that does not involve an export tax," said one Argentine farmer.
"The country considered to be one of the breadbaskets of the world is falling towards international oblivion," he added.
What size do we now put on the Ary wheat crop for 2009? The USDA left their production estimate unchanged at 11 MMT on Wednesday. That looks hopelessly optimistic given that planted acreage is seen down almost 40%, yet they are forecasting a crop 33% higher than last year!
Using Oil World's acreage number, if Argentina was to get the same 2 MT/ha yield as last year's drought-ravaged crop then we would only have a final production figure of 5.6 MMT. The USDA are currently using a yield figure of 2.75 MT/ha which would give us final production of 7.7 MMT. Two years ago in 2007/08 yields were 2.92 MT/ha, even a return to those halcyon days would only give us a final output of 8.18 MMT.
Not only has the country been hit by the worst drought for 70 years, which has now lasted eighteen months, but there are also huge financial disincentives to plant wheat.
The way things look right now the world's fifth largest wheat exporter just a couple of years ago won't even be self-sufficient in wheat in 2010.
It's a Catch 22 situation, the more farmers cut back on wheat plantings, the more likelihood there is that there will be no wheat export licenses granted at all for 2009/10, therefore the lower the incentive to plant.
This leaves President Cristina Fernández de Kirchner in an interesting position, as she recently struck a deal with wheat exporters to get them to buy a million tonnes of old crop wheat, in exchange for guarantees that the government would issue export licenses for a million tonnes of wheat in the next marketing year.
The move was supposed to stimulate new crop plantings, but has clearly failed. Will she stand by her word and allow a million tonnes of wheat out of the country in the next marketing year, knowing that they don't have enough to cover their own domestic requirements?
"Even if it does rain, most farmers are looking at alternate grains such as oats, barley and any other product that does not involve an export tax," said one Argentine farmer.
"The country considered to be one of the breadbaskets of the world is falling towards international oblivion," he added.
What size do we now put on the Ary wheat crop for 2009? The USDA left their production estimate unchanged at 11 MMT on Wednesday. That looks hopelessly optimistic given that planted acreage is seen down almost 40%, yet they are forecasting a crop 33% higher than last year!
Using Oil World's acreage number, if Argentina was to get the same 2 MT/ha yield as last year's drought-ravaged crop then we would only have a final production figure of 5.6 MMT. The USDA are currently using a yield figure of 2.75 MT/ha which would give us final production of 7.7 MMT. Two years ago in 2007/08 yields were 2.92 MT/ha, even a return to those halcyon days would only give us a final output of 8.18 MMT.