Heavy rain is expected to finally hit Argentina’s drought-stricken farm belt this weekend, but analysts warned that some corn crop losses are irreversible and are sure to crimp government finances.
Argentina is the No. 2 global corn exporter and the No. 3 supplier of soybeans, which serves as a major source of protein around the world. So recent weeks of unforgiving Southern Hemisphere summer sun, intensified by dryness caused by the La Nina phenomenon, has caused concern about global food supplies.
«There is a high probability of rains, starting on Saturday and lasting through Tuesday,» the government’s INTA weather forecasting agency said on Friday.
«They will be geographically widespread and will vary in intensity,» the agency said, while assuring that the showers will fall on Argentina’s main Pampas grains belt centered in Buenos Aires, Cordoba and Santa Fe provinces.
The Buenos Aires Grains Exchange said yesterday that that a storm front was expected to dump more than 100 millimeters (3.9 inches) of rain in some areas over the week ahead.
But the moisture will come too late for some corn fields. Hopes have already faded for Argentina to help replenish global grain supplies depleted by a lackluster US harvest. Soy farmers say they are in trouble as well.
«This is very bad news for the government’s finances, which are largely dependent on agriculture export tariffs, and the central bank, which was looking forward to the harvest in order to replenish its international reserves,» said Walter Molano, who analyzes Argentina for US-based BCP Securities.
The heat wave will add to government fiscal challenges this year as Argentina faces fallout from a sluggish world economy and Europe’s financial meltdown. So not only farmers and grains traders but sovereign bondholders as well are watching the vast blue Pampas horizon for signs of rain.
Buenos Aires-based consultancy Finsoport says Argentina’s farm exports in the 2011/12 crop year will total $26.3 billion, down 12 percent from forecasts made before the drought. The government will lose more than $1 billion in revenue as a consequence, it said.
The Agriculture Ministry yesterday trimmed its estimate of the area to be planted with 2011/12 soy to 18.8 million hectares from 19 million previously. But it is corn, which has a shorter and more delicate flowering period, that has really suffered.
The ministry said corn yields could be slashed by 20 percent to 50 percent due to the heat wave, which is related to La Nina, an abnormal cooling of waters in the equatorial Pacific Ocean that affects weather patterns and threatens to upset commodity markets from soy to coffee.
The US Department of Agriculture expects Argentina to produce 50.5 million tonnes of soy and 26 million tonnes of corn in the 2011/12 season. Other analysts are betting that this season’s corn crop will come in under the record 23 million tonnes produced by Argentina in 2010/11.
President Cristina Fernandez, who started her second four-year term last month after an easy October re-election, has had a troubled relationship with the farm sector. Growers complain about her heavy-handed intervention in the market, including corn export curbs and a whopping 35-percent tax on soy exports.
But tempers have cooled since Fernandez’s government was rocked in 2008 by massive farm protests over her tax policies and the agriculture minister met with growers this week to discuss possible aid programs to soothe the drought’s impact.
Source: Buenos Aires Herald