Argentina Grain and Feed Annual

Argentina Grain and Feed Annual

Wheat production in marketing year (MY) 2021/22 is projected at a record 20.8 million tons, 300,000 tons higher than USDA Official. As a result, wheat exports are also forecast to be the highest in history at 14.0 million tons (including wheat flour). Barley production in MY 2021/22 is forecast at 4.8 million tons, in line with USDA Official, however, exports are forecast at 3.2 million tons, 300,000 tons lower than USDA Official on higher projected domestic consumption. Corn production in MY 2021/22 is also forecast at a record of 51.5 million tons, slightly higher than USDA Official because of marginally larger acreage. Exports are forecast at 37.4 million tons, 1.4 million tons higher than USDA Official on higher production and beginning stocks. Sorghum production in MY 2021/22 is projected at 4.5 million tons, 350,000 tons higher than USDA Official and nearly the highest in a decade in response to strong Chinese demand. Rice production in MY 2021/22 is forecast at 845,000 tons milled basis, slightly.

Wheat
Post projects wheat production in marketing year (MY) 2021/22 at a record high of 20.8 million metric tons (MMT), 300,000 tons higher than USDA Official. Post adjusts upwards its projected MY 2021/22 harvested area to 6.65 million hectares, 2 percent higher than USDA Official. Total acreage would have been even higher except that some areas in northern Cordoba, Santiago del Estero, and Chaco suffered dry conditions during planting. Wheat planting began in May and will conclude before the end of July. Soil moisture is adequate in most provinces, except in north-central Cordoba which needs additional precipitation. Despite increases in agricultural input prices, farmers are continuing to make investments in improved seed varieties and agrichemicals to improve quality and yields, as they anticipate positive financial returns at current prices. Fertilizer prices have risen more than the prices of other inputs. Post estimates a yield of 3.13 metric tons per hectare.

With an expected large production and stable domestic consumption, wheat exports in MY 2021/22 are forecast at a record 14 MMT, including wheat flour in its wheat equivalent. This volume is 500,000 metric tons higher than USDA Official. Exports in the first 4-5 months of the new marketing year most likely will be directed primarily to South East Asia and African countries. Monthly exports to Brazil are relatively stable throughout the year, with a projected total volume of 5.8-6.0 MMT (without flour) in MY 2021/22. Wheat exports in MY 2020/21 are forecast up at 10.7 MMT (including wheat flour), 200,000 metric tons higher than USDA Official. Through early July 2021, exporters had declared exports for 10.1 MMT of wheat (not including flour).

In an effort to control domestic food prices by increasing domestic supplies, the government of Argentina has imposed various export controls, most recently in beef and earlier in corn. Wheat is also considered a key commodity and local market participants are aware that the government would be willing to intervene in the wheat export market if there was perceived to be a lack of supply in the domestic market. Due to the difficulty in estimating wheat stocks in the country, the government has intensified its efforts to coordinate with industry and monitor the availability of wheat. Brokers and exporters believe that ending stocks of 2.0-3.0 MMT would be sufficient to provide liquidity in the domestic market.

Barley
Production for MY 2021/22 is estimated at 4.8 MMT, matching USDA Official, but on a slightly lower acreage. Planting is expected to be completed by the end of July. Late in the planting window, some producers in southeast Buenos Aires Province are shifting from wheat to barley, seeking higher returns. Overall, the crop condition is very good, though some parts of central Buenos Aires Province are struggling with excess soil moisture. Despite increased production costs due primarily to higher fertilizer prices, farmers are expected to invest in inputs to maximize crop yields and quality.

Production for MY 2020/21 is estimated at 4.1 MMT, 9 percent lower than USDA Official, on a harvested area of 950,000 hectares. The spot price for feed quality barley is $210 per metric ton and malting barley is $235 per metric ton. Some local contacts believe the persistence of these elevated prices indicate that 2020/21 barley production could be lower than originally estimated by USDA Official, potentially as low as 3.9 MMT.

Post continues to forecast MY 2021/22 barley exports at 3.2 MMT, 300,000 metric tons lower than USDA Official. Through early July 2021, there were 825,000 metric tons of barley export declarations, of which 90 percent was feed quality. China is the primary destination for this volume. Exports for MY 2020/21 are expected at 2.5 MMT, 500,000 metric tons lower than USDA Official, which has an estimated production significantly higher than Post. Through mid-July 2021, exporters had made 2.35 MMT worth of barley export declarations. Traders do not expect further feed barley sales to China for the rest of the marketing year as France and the Ukraine are currently more competitive than Argentina. Some 150,000 metric tons of malting barley could be sold in the next few months, for a total of 1.0 MMT in MY2020/21. In the first months of MY 2020-21 China purchased more than 90 percent of the feed barley (mostly graded FAQ – Fair Average Quality barley) as well as three vessel loads of malting barley totaling 180,000 metric tons. Chinese demand for Argentine barley began in MY 2019/20 with a strong increase in 2021 after it entered a commercial dispute with Australia, its historic main supplier.

The following chart shows Argentine barley exports for the first half of MY 2020/21 (December 2020- May 2021) which totaled 1.92 million tons. The chart is based on shipment data published by Nabsa, a local maritime agency, because Argentine government export data reports the destination of many cargoes as “Confidential”.

Corn
Production in MY 2021-22 is forecast at 51.5 MMT, the highest ever, but in line with the past three crop seasons. Post’s projection is 500,000 metric tons and 150,000 hectares higher than USDA Official. However, Post’s average yield is forecast 1.4 percent lower. Long range weather forecasts currently predict a dry spring, which could complicate the development of early season corn. This could encourage some farmers to plant late season corn instead, which is believed to have less yield variability but a somewhat lower yield ceiling than early-planted corn. Significantly higher prices of fertilizers and crop protection products have lately reduced economic margins, but corn is still the most potentially remunerative option in areas close to feedlots, ethanol plants, or ports. Despite recent volatility in global commodity markets, local farmers are optimistic that grain prices will return to peak prices seen in early May 2021. Many farmers have already purchased their inputs, opting for significant investments in inputs, with the aim of increasing their profitability by maximizing output.

With roughly 75 percent of the MY 2020/21 corn harvest completed, many sources and contacts have revised upwards corn harvested area and production, especially in the more marginal corn producing Provinces of La Pampa, Santiago del Estero, and Entre Rios. Late planted corn is yielding very well in most areas, but especially in southern and eastern Cordoba Province which had well timed and adequate rains. Post projects MY 2020/21 corn production at 48.8 MMT, 300,000 metric tons higher than USDA Official.

Corn exports for MY 2021/22 are projected at a record 37.4 MMT, and 1.4 MMT higher than USDA Official. Post estimates a larger total supply because of higher production and higher beginning stocks, further post estimates a lower domestic consumption for MY 2020/21 at 14.0 MMT, 500,000 metric tons lower than USDA Official. The Argentine economy is rebounding after last year’s pandemic, but at a slower pace than expected. High corn prices have raised costs for most livestock sectors, which are expected to grow but only moderately. However egg production is an exception, where a significant drop in production is expected due to low retail prices and increased production costs. Corn consumption for bioethanol is expected to total 1.25 MMT in 2021, 150,000 metric tons higher than in 2020.

Sorghum
Production for MY 2021/22 is forecast at 4.5 MMT, 350,000 metric tons higher than USDA Official as Post projects higher yields. Production would be the highest of the past 9 years. In mid-2020 global sorghum prices began to increase significantly as a result of China’s increased demand. In Argentina, local sorghum prices rose higher for most of the year. Farmers responded by expanding area in MY 2020/21 and are expected to do so again in MY 2021/22.

Sorghum production peaked in Argentina in the 1970s, but after a resurgence during the period 2008-2013, there has been reduced interest among farmers and less investment by seed companies. However, during the last crop season, sorghum represented the best economic alternative for many farmers, combining high prices with lower production costs than corn. Practically speaking, there is now no more sorghum seed available for the MY 2021/22 planting season, with vendors selling out several months ahead of planting. Sorghum is often grown on more marginal land as a low-risk/low-reward crop, but with higher expected returns this year, farmers are looking to planting sorghum in fields with better soils, using new hybrid seed, increasing the level of fertilization, and improving the use of crop protection products and management. Post projects the average yield at 4.7 tons per hectare, 8 percent higher than USDA Official. An important factor that helps to explain the expansion of sorghum area is the fact that farmers can purchase futures contracts, locking in part of their potential income. Current sorghum futures prices (April 2022) are $180 per metric ton, 7.7 percent lower than that of corn.

Argentina is one of the four countries that have a phytosanitary protocol with China to export sorghum. Local exporters together with SENASA, the Argentina phytosanitary service, have invested in processes to ensure the quality of sorghum exports. One of their main focuses is preventing the presence of Johnson grass seed in China-bound shipments.

Exports in MY 2020-21 are estimated at 1.6 MMT, 300,000 metric tons higher than USDA Official. Through early July 2021, exporters requested export permits to ship 1.6 MMT of sorghum. Based on private trade data, by mid-July 2021 Argentina has shipped 950,000 metric tons of sorghum. Only 4-5 companies participated and China was the primary destination.

Rice
Post projects rice production for MY 2021/22 at 845,000 metric tons, milled basis, close to matching USDA Official, but with an area 5,000 hectares lower and thus a higher average yield. Market conditions, with projected good famer returns, could result in a total planted area of 200,000-205,000 hectares, but the low level of the Parana River, which is expected to reach record lows in the next few months, could prevent some planting or cause some planted field to be abandoned. Rice producers will try to plant as much area as they can but will have to adapt their irrigation systems to scarce water supplies. The level of the Parana River has a direct influence in the rice production areas of the San Javier River in Santa Fe province, the Corrientes River in Corrientes province and Guayquiraro River in the Province of Entre Rios. The rest of the country’s rice area is expected to expand somewhat as reservoirs in Corrientes are in good condition and producers in Entre Rios irrigate mostly with ground water.

Anticipation of good returns in MY 2021/22, after several years of low rice prices and tight returns, will encourage a higher use of inputs at the farm level which could result in better yields than in the past several years. MY 2020/21 saw record high yields of 7.46 tons per hectare. Because of this, Post raises production for MY 2020/21 to 897,000 metric tons milled basis, 91,000 metric tons more than USDA Official. Local agronomists attribute these higher than normal yields to excellent climatic conditions experienced across the region, with warm, sunny days and cooler nights. In addition to high yields, grain quality has been generally good, with a lower-than-normal percentage of broken rice.

Exports in MY 2021/22 are projected at 390,000 metric tons, 50,000 metric tons higher than USDA Official, based on projected production and exportable supplies. Carry-in and carry-out volumes are forecast to be at very low levels. Rice exports in MY 2020/21 are forecast at 430,000 metric tons, milled basis, 100,000 tons higher than USDA Official as production was significantly higher than initially forecast. Roughly half of this volume is already committed with export permit declared. To date, the leading destinations are Cuba, Spain, Chile and Brazil. The remainder is expected to be sold throughout the rest of the marketing year but there is some uncertainty about destinations due to the current high cost of freight. Most likely Chile, Spain and Brazil will continue to be important markets. The low level of the Parana River would not affect logistics and exports of rice as shipments are normally loaded at ports located downriver which have seen higher water levels.

Brokers and mills indicate that beginning stocks in MY 2020/21 (April 1, 2021) were roughly 15,000-20,000 metric tons of milled rice. In fact, some mills ran out of stocks in December 2020 because of the combination of strong domestic consumption and large exports to Brazil in the last part of 2020.