Thursday, September 29, 2011

Will bullish Sth American estimates hit the bin?

After watching the Argentina and Scottish game in cold wet Wellington on Sunday night, it got me thinking how is the country shaping up for the winter wheat harvest and all important corn and soybean planting. Argentina used to be one of Australia main wheat competitors as both having harvest in the same period, actively selling new crop wheat at the same time. However, total area devoted to wheat has been on the decline, with 4.6 million acres planted this year. This is a 30% decrease over the average sown crop in the 2000’s.

The area devoted to soybeans has risen considerably since 1996, when only 5 million hectares was planted. Area has continued to grow and expand with new land being cultivated in the northern subtropical regions over the last 10 years. The USDA Soybean plantings in 2011 would be 19.3 million hectares. Compared to corn, which 3.6 million hectares is intended to be planted.

La Nina is a known drought producer in Argentina, with continued cooling in the eastern tropical Pacific Ocean it is in its early stages. Hardly any rainfall has occurred in the past 30 days in the main corn provinces. After a relatively dry couple of months, last weeks rain in Argentina was much needed. Up to 50mm fell in the main production states of Buenos Aires and Cordoba. This is perfect timing for wheat and in encouraging rapid corn/bean plantings.

Farmers are inspired to increase corn plantings due to the US production shortfall and higher prices.  Some analysts predict corn area may expand by 20% over last season. The new corn harvest is projected to be 27.5 mmt (USDA estimate). That would allow for 19.5 mmt of exports in 2011-12, up 34% from a year ago. Apparently the USDA takes a very conservative approach to potential big changes in South America, but seemed to embrace “market chatter” in this months report. So while some traders point to increased global corn carryover as a source of price pressure, those tonnes are far from in the bin with plantings just getting started..!


And for the record, the Pumas got over the line by 1 point. But you couldn't tell that by all the bagpipes going off in the pubs after the game.... 

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