The South America Crop Report for January 16, 2017

By Patrick Archer and Eduardo Blasina

The Argentina Crop Report

A new report out Friday morning says Argentina’s 2016/17 soybean harvest will fall below original forecasts, as key growing regions of the country have received between 12 and 18 inches of rain over the past 30 days. The flooding ghosts of April 2016 have apparently returned, and there are large sections of the Pampa Húmeda where as many as 50% of the beans will go unplanted. Revista Chacra estimates this will reduce the total planting area by 700,000 hectares (1.73 million acres). “With all of the cards on the table, our study is estimating total soybean production volume for the 2016/17 harvest of 50 million tons. We believe it is a reasonable estimate which factors in a 9% reduction from the original forecast of 55 million tons.” So why isn’t Chicago reacting negatively to the corn and soybean news from Argentina? Analysts are now looking at the evolution of the Brazilian crop, which could more than compensate for the losses in Argentina. Meanwhile, the USDA’s first monthly report of 2017 also left Argentina soybean production unchanged at 57 million tons. (Revista Chacra)

Argentina’s National Food & Safety Quality Service (SENASA) is working to prevent the entry of citrus affected with HLB (Huanglongbing), according to a report Friday from InfoCampo. The citrus industry is Argentina’s most important fruit segment accounting for US$1 billion in revenue annually and over 100,000 jobs in ten provinces of the country. With the HLB National Prevention Program, SENASA wants to stop tourists from entering the country with infected citrus from neighboring Brazil and Paraguay where the disease has been present and damaging citrus for a few years. As greening currently has no cure, infected trees must be uprooted and destroyed immediately. According to InfoCampo, both Brazil and Paraguay have lost thousands of acres of citrus groves, and SENASA is probably fighting a losing battle at this point given the presence of HLB in groves in the northern provinces of the country like Tucumán. Current prevention efforts are aimed at preventing the spread through the northwestern provinces. (InfoCampo)

“Once again, the forecasts came true…climate instability, high temperatures, and the passing of storm fronts were the relevant weather characteristics this week,” says the new report from the System of Crop Estimates (SEA) from the Santa Fe Grains Exchange. Over the last two weeks, there were rain accumulations of over 400mm (15.75 inches) in several departments including Castellanos (495 mm), Las Colonias (445 mm), La Capital (430 mm), and San Justo (415 mm). The SEA report says “the climate situation determined and halted almost entirely crop activities, primarily the planting of second-harvest soybeans, grain sorghum, cotton, and lots of second-harvest corn. These climate conditions, primarily in the central departments, have returned in a very similar fashion to eight months ago and are now causing great uncertainty regarding what has already been planted due to the excess rainfall. After reaching 85% of the total forecast planting area (550,000 hectares) last week, there was no planting of second-harvest soybeans this week. (El Litoral)

The number of trucks entering Argentina’s main grain Port of Rosario rose 23% in 2016, according to a Friday report from the Rosario Grains Exchange (BCR). “The number of trucks rose 23% in one year, which would be a record for Rosario and is a clear demonstration of the great potential of Argentina’s farming sector that can continue to grow in the future benefiting the economy of our country,” said the report. A total of 1.975 million trucks loaded with grains arrived at the Port of Rosario last year carrying an estimated 55.3 million tons of grains for export. The national production estimate for grains in 2017 is between 110 and 115 million tons, and an estimated 2 million trucks should arrive at the Port of Rosario and the processing plants located within the terminal complex. The truck estimates are based on video camera data collected by Williams Entregas. (InfoCampo)

The Brazil Crop Report

With a 0.6% increase in planting area, Mato Grosso is forecasting a super harvest of grains with a 22% increase in production in the 2016/17 campaign compared to last year. The new report from the National Supply Company (CONAB) estimates Mato Grosso will produce 53 million tons of grains this year or almost 25% of total national production. In total, CONAB believes Brazil will produce 215 million tons of grains this year which would be a 15.3% improvement over the 2015/16 cycle. Average productivity is also forecast to improve this year to 3.7 tons of grains per hectare which would be 21.4% more than what was harvested per hectare last year. Despite recent problems like the delay in planting and the lack of rainfall in the last harvest, soybeans should once again be the flagship of Brazil’s summer harvest. Average soybean productivity is expected to be 10.3% higher this year compared to 2015/16 when local producers harvested 2.8 tons of soybeans per hectare. The total area planted with soybeans is estimated to be 59.1 million hectares (146 million acres). (Globo)

With expectations of a super harvest, Brazil is going to have to export more corn in 2017. That is the headline of Naiara Araújo’s analysis in SFAgro. “After coming off a corn harvest that was damaged by climate conditions and a supply crisis, the total volume produced in 2016/17 should be a record for Brazil. Agroconsult estimates total production of 94.9 million tons of corn which would be a 32.3% increase over last year. For the summer harvest, the expectation is that production will reach 30.3 million tons or 6.8% more than last year. And already for second harvest corn (safrinha), the company is forecasting 64.6 million tons due to a 10% increase in planting area. In case this holds true, the safrinha harvest would be 40.9% greater than last year. The record harvest would be good news for the domestic market and for the national animal protein chain. While domestic demand will rise from 58 to 62 million tons, that will not be enough to absorb all national production. “Exporting will be the key to draining that supply, but it will be a real challenge to export all of that corn in the second half of the year. If producers only look to the internal market, that will be a problem putting more pressure on corn prices,” says Agroconsult director André Pessôa. (Successful Farming)

Brazil and China are planning to launch a new fund to finance infrastructure projects in March, according to a Reuters report in O Globo. Created last year, the US$20 billion fund for roads, seaports, airports and related logistics will begin to finance the construction of railroad lines linking Brazilian ports with the main corn and soybean producing regions of the interior. Not surprisingly, China is the largest buyer of Brazilian grains. Analysts believe the new fund could help the government of embattled president Michel Temer to jump start much-needed investment in infrastructure at a time when the country’s recession is threatening to continue for a third consecutive year. Once operational in March, the fund will begin to evaluate projects in Brazil’s mining, petroleum and agriculture sectors. The Chinese are backing three quarters of the fund (US$15 billion), while the balance is coming from the BNDES and the Caixa Econômica Federal, according to Reuters. (O Globo)

The Uruguay Crop Report

Global food and commodity prices touched a floor just over a year ago and have had mixed paths of recovery since then: good in the case of soybeans and dairy, but modest in practically everything else, writes FarmsUY’s Eduardo Blasina in a special report for El Observador. “The most important recoveries for Uruguay in 2016 were with dairy products and oilseeds. Dairy prices rebounded 30% last year finishing 2016 at their highest levels since November 2014, and 2017 should be another good year based on current prices and the last two auctions of Fonterra. Meanwhile soybean prices in Uruguay, which hit their lowest point in January of last year, rebounded 26% last year. Although still far from the record levels of 2008 and mid-2014, soybean prices in November hit their highest levels since August 2014.” The 2017 outlook for soybean prices is mixed given the combination of floods and drought in Argentina. On the demand side, China keeps buying. It’s very likely soybean prices reached a maximum last month and, barring some serious climate events, will remain flat or trend down slightly in the coming months. The pendulum that has favored oilseeds until now should begin to stabilize grain prices.” (Blasina/El Observador)

Uruguay producers are in the process of planting 1.2 million hectares (2.97 million acres) of summer crops in the current 2016/17 campaign, according to new data published in the 2016 Spring Farm Survey. Of that total, soybeans accounted for 91% or 1.103 million hectares of the total planted. The 2016 planting total is 4% below the total number area planted for the 2015/16 campaign, while total soybean planting is down 3% compared to last year. As of now, Uruguay producers have planted 922,000 hectares (2.29 million acres) or roughly 75% of the planned total. First harvest soybeans in Uruguay account for 67% of all soybeans planted this year. As of now, Uruguay producers have planted 90% of their soybeans and 85% of their corn and sorghum. The same report estimates winter crop production in Uruguay for 2016/17 will fall around 8% to an estimated 453,000 hectares (1.12 million acres). So far, an estimated 296,000 hectares have been harvested, and wheat accounts for 215,000 hectares or 72% of the total. (Diario El Pueblo)

Uruguay beef exports to South Korea rose 227% last year, a positive trend in the demanding Asian market which first opened to Uruguay in August 2012 after six years of negotiations. Uruguay exported beef worth US$16.72 million to South Korea in 2016 compared to just US$5.1 million in 2015. South Korea is a strategic destination for Uruguay beef exports, because the country has a market of consumers with relatively high purchasing power. According to the USDA, South Korea imported 510,000 tons of beef in 2016, and that figure is expecting to reach 520,000 tons this year. Local exporters see room for improvement, as Uruguay currently accounts for only 1% of all South Korea beef imports. In related news, several analysts consulted by Notícias Agrícolas say the anticipated “Trump effect” of renegotiating trade deals and rising interest rates could have a positive impact on the dollar/real exchange rate which ultimately benefits Brazilian exporters of beef, poultry and pork. (The South America Cattle Report)

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