Drought threatens a key planting season in Argentina again

In addition to the weather risks in the United States and the effects of the Russian military operation in Ukraine, the crop market is facing a new threat: The almost relentless drought impacting soybean and corn crops in Argentina.

The drought has accumulated for three consecutive years attacking wheat plants harvested in November and December.

Given this phenomenon, the national government could restrict exports to guarantee local demand.

Local farmers are going through one of the most difficult years to plant their most important crops in commercial terms: soybean and corn.

Argentina is the largest supplier of soybean meal for livestock feed and soybean oil for cooking and biofuels, so traders from Chicago to Kuala Lumpur are watching the situation closely.

Government leaders are also preparing for next year’s general election.

That’s because Argentina’s delicate finances depend on next year’s soybean crop exports, which are worth US$25 billion.

Generally, soybean planting begins at this time, with three-quarters of the fieldwork completed by the end of November.

But many farms are too dry for seeds to be planted on them. Tuesday night’s (October 25) rain was a welcome relief but not enough.

“These rains hardly change anything,” said Maria de Estrada, a senior official of the government’s agricultural emergency department.

De Estrada notes that farmers are starting the 2022-23 season in even drier conditions than 2008-09, a season that exudes painful memories among farmers.

While the La Niña weather phenomenon will weaken during the southern hemisphere summer, the outlook remains bleak for the next two months, with drought persisting for most of the planting window.

In La Pampa province, only half of producer Julio Reumann’s 600 hectares reserved for soybeans have been wet enough to consider planting a seed into the ground.

Corn planting has also gotten off to a slow start. That means corn from Argentina, the third-largest supplier, will reach world markets later than usual as farmers call for rains to produce a late crop.

If it stays dry, they will take their chances with soybeans, which require less nutrient expenditure and withstand drought better, accentuating a preseason shift to oilseeds.

“If it rains enough, from here, we will sow 100 hectares of late corn and 100 of soybeans; if not, we will sow everything with soybeans,” said Ariel Striglio, a farmer from Santa Fe province.

In the end, up to 300,000 additional hectares of soybeans could end up being planted on top of the Buenos Aires Grain Exchange’s current national estimate of 16.7 million hectares, said Martin Lopez, a forecaster for the exchange.

Cold fronts that bring bursts of moisture, such as the one on October 25, can form within La Niña, and another is likely to appear around November 8, said Natalia Gattinoni, a government agricultural meteorologist.

The problem with waiting for rain is that soybeans yield less when planted late.

Argentine farmers need a strong soybean season to salvage the crop investment cycle next year.

Reumann is already paying penalties on wheat contracts it will not be able to honor.

Argentina’s solvency as a nation is also at stake since the central bank cannot spare those dollars.

“The small wheat crop and then the corn crop leaves a long summer ahead until soybeans are harvested,” said Mateo Reschini, research analyst at Inviu.

“If soybean plants don’t get rain, it could be a disaster.”

“I’ve never seen it this bad,” said farmer Striglio. “I pray for rain to come.”

With information from Bloomberg