Argentine wheat crop gets second upgrade in two days

The Buenos Aires grains exchange, which late last month lifted hopes for Argentina’s corn and soybean sowings, lifted its forecast for wheat production too, the day after an upgrade from Informa Economics.

The exchange raised by 600,000 tonnes to 10.1m tonnes its forecast for the wheat crop in the southern hemisphere’s second-ranked exporter of the grain, as harvest is drawing to a close.

The upgrade reflected improved yield prospects, particularly in the major producing province of Buenos Aires, where harvest results have beaten forecasts.

“In the core growing area of southern Buenos Aires, which holds more than 24% of the area planted with cereals average yields were obtained above our initial expectations,” the exchange said.

The national yield result had, with 87% of the harvest completed, improved to 2.96 tonnes per hectare from 2.80 tonnes per hectare two weeks ago.

‘Cratering the export market’

The upgrade still leaves Argentina looking at a drop in its wheat production in 2015-16, with the Buenos Aires grains exchange pegging the previous harvest at 11.75m tonnes.

The decline reflects the weak popularity of wheat among farmers thanks to export taxes and quotas imposed by the previous government, headed by Cristina Fernndez de Kirchner – but which have now been reformed by the administration of Mauricio Macri which took power last month.

Indeed, with Argentine exports also helped by a slump in the peso, following currency liberalisation, and encouraged by a government keen to bolster the country’s dollar reserves, the country’s harvest, and so the depth of its exportable supplies, have taken a high market profile.

Argentine wheat, offered at lowball prices, last month won its first victory in three years at a wheat tender by Gasc, grain authority for Egypt, the world’s top importer of the grain.

And it is believed to be being offered cheap in other tenders too.

“Argentina is apparently still cratering the export market,” said Jonathan Watters at US broker Benson Quinn Commodities.

‘Quality issues’

At UK grain trader Gleadell, managing director David Sheppard said that “the threat of cheap Argentine wheat entering the market has now become a reality.

The country’s export and currency reforms will “release close to 4m-5m tonnes of wheat onto the export market”.

However, questions remain about the quality of Argentina’s crop, with some observers saying that, thanks to damage from harvest-time rains, only limited amounts meet the 12.5% protein level needed to meet, for example, the needs of importers in the key Brazilian market.

Terry Reilly at Chicago broker Futures International, while acknowledging some estimates for the Argentine crop as high as 12.0m tonnes, said that its forecast was “below 10m tonnes on quality issues”.

Still, there are rumours that Argentina is cutting prices to compete in feed markets too, with market rumours this week that the country has some some supplies to the US.

Informa Economics on Wednesday lifted its forecast for the crop by 2m tonnes to 11.5m tonnes, while the US Department of Agriculture is due next week to revisit its estimates for world crops, which currently put Argentine wheat output at 10.5m tonnes.

The Buenos Aires grains exchange did not comment on crop quality, but did highlight some rains delays to the harvest, which is running 8.9 percentage points behind last year’s.