Late Price Rises Encourage Planting in Argentina

Farmers in Argentina are just now beginning to plant the 2010/11 soybean crop. Thirteen percent of the crop had been planted as of October 28, ahead of normal. Planting activity accelerates rapidly in the second half of October and continues into January. The Buenos Aires Grain Exchange is forecasting soybean area of 18.7 million hectares, down 1.3 percent from 2009/10.

Prices for soybeans have been considered profitable in the months leading up to soybean planting, but other crops are also profitable, so there is a strong competition for available hectares. Monthly average soybean prices FOB Argentina were in a relatively narrow range of US$ 391 and US$350 between October 2009 and June of 2010. Average prices increased to US$425 in August and to US$438 in September. The question remains to be answered, to what extent was the late increase in prices prior to planting strong enough and soon enough to encourage planting?

Wheat area in 2010/11 is estimated at 4.3 million hectares. Wheat is currently in the heading stage and will be harvested from mid-November to mid-January. Though area is up from last year which had drought conditions prior to wheat planting, it is the third lowest wheat area in the last two decades. Consequently, a larger than normal proportion of the soybean crop will be single cropped as opposed to double cropped following wheat. Single cropped soybeans are generally higher yielding than double cropped soybeans.

The soybean to corn price ratio monthly averages ranged as low as 1.98 and as high as 2.23 between October 2009 and June 2010 compared to a 10-year average value 2.19. The corn price increased more than soybeans in August and September, and the price ratio declined to 2.10 in August and 1.89 in September. Corn is planted earlier than soybeans, soil moisture levels were low and delayed early corn planting, but rains came and reports indicate the late price increase for corn may have been sufficient to encourage corn planting.

Prices for corn have been considered profitable in the month’s leading up to corn planting. Between October 2009 and June 2010, average prices were relatively stable, monthly average FOB prices ranged between US$178 and US$161. Prices increased strongly to US$202 in August and US$231 in September. Dry soil was a problem early in the planting window, but increasing rainfall late has enabled corn planting to go forward. Input prices were reportedly favorable for corn prior to planting, but with rising commodity prices, input prices have also been rising. Nonetheless, good precipitation along with strong prices are encouraging corn planting.

The corn crop was approximately 69 percent planted by October 28, ahead of last year’s drought slowed pace. The main growing area is from Southern Cordoba and Southern Santa Fe and extends southward to Southern Buenos Aires province. Planting is proceeding as is normal from north to south in the corn region. Trade estimates have been increasing and USDA increased its forecast of area harvested in October from 2.7 million hectares to 3.2 million. Yield was increased slightly due to improving soil moisture levels and the production forecast was increased from 21.0 to 25.0 million tons.

Sunflowerseed prices were favorable in the months leading up to planting.  FOB Argentine prices ranged from US$398 per ton to US$420 per ton between March and June 2010. Prices dropped in July but recovered in August and rose to US$447 in September. The soybean to sunflowerseed price ratio was favorable for sunflowerseed between March and June, ranging from 0.84 to 0.89 compared with the 10-year average ratio of 0.94. The ratio switched in favor of soybeans going above average starting in July. Extreme drought in Russia has reduced the crop there, but recent reports indicate a large crop is being harvested in Ukraine. On balance, the FSU crop is forecast lower this year to the advantage of Argentine sunflower producers. The USDA is forecasting Argentine sunflower area of 2.0 million hectares, up from 1.5 million last year. Yield is forecast higher this year following last year’s drought and output is forecast up 48 percent at 3.4 million tons.

Current USDA area and production estimates for grains and other agricultural commodities are available in World Agricultural Production, a publication of the FAS International Production Assessment Division, or at PSD Online.