The Van Trump Report

Corn Has Overtaken Soybeans to Become Argentina’s Top Crop

Argentine  farmers are set to produce a record corn crop in 2021-22, with the USDA’s Foreign Agricultural Service’s Buenos Aires Post pegging production +1.5 million more than the USDA’s official estimate. The record-setting corn crop will partially be at the expense of soybeans as several factors make the oilseed less attractive to Argentine farmers. New export taxes set at 33% for soybeans and 12% for corn and wheat has resulted in lower farm gate prices for soybeans and made corn more attractive relative to soybeans. It also encouraged farmers to plant winter grains like wheat and barley and grow second crop soybeans, FAS said.

In its latest report, FAS reduced its forecast for Argentina’s 21/22 soybean production by -1.5 MMT from its previous estimate to 49.7 MMT, which is -2.3 MMT lower than what the USDA forecast in the October 2021 World Agricultural Supply and Demand Estimates (WASDE). Both are higher than the 44 MMT the Buenos Aires Grains is currently forecasting. By comparison, FAS forecasts Argentina’s 21/22 corn production at 54.5 million metric tons (MMT), just slightly less than the 55 MMTs forecast by the Buenos Aires Exchange. USDA pegs the country’s 21/22 corn production at 53 MMT.  

Argentina’s soybean production peaked in 2014/15 at 61.45 MMT, and has mostly been on a steady decline since. At the same time, the country’s corn production has doubled over the last decade from just over 25 MMTs in 2010/11 to an estimated 50 MMTs in 20/21. Some of this transition seems to have clearly been driven by government policies. Under the Presidency of Mauricio Macri from 2015-2019, the government eliminated export tariffs on corn and wheat but maintained a 30% levy on soybeans.  

Farmers’ preference for corn over soybeans has also been influenced by increased availability of high-quality hybrid corn seed adapted to different regions, according to FAS. In Argentina, hybrid corn seed must be purchased every year, whereas hybrid soybean seeds can be saved by farmers. That means seed companies have invested in corn seed varieties more so than soybeans. Argentine corn yields have risen faster than soybeans over the last 10 years and new varieties have performed better under drought stress conditions than soybeans. As a result, FAS says Argentine farmers no longer view soybeans as the least risky crop.

Farmers in Argentina also cite increased concerns about soil health after an extended period of continuous soybeans on soybeans. As Argentine farmer and agricultural advisor Mauricio Kunicic explains, “When Macri lowered the taxes on corn and wheat, everything started to change. In reality, we went back to the traditional rotation, because the years of soybean monoculture were exceptional.”  Fernando Botta, head of the Agrobrokers consultancy firm, says most Argentine producers have now abandoned soy monoculture, even if corn requires a higher initial investment. FAS also notes that Argentine farmers are in a better position economically after a profitable 20/21 season.    

Argentina’s anticipated record crop translates to potentially record corn exports too, with FAS forecasting 40 MMTs, a full +2 million higher than USDA forecast in the October 2021 WASDE. That’s even accounting for a significant reduction in Brazil’s corn imports from Argentina, which skyrocketed in 20/21 due to Brazil’s lower production. FAS also pegs Argentina’s 20/21 corn exports +1 MMTs higher than the USDA at 38.5 MMTs.

As for soybeans, FAS pegs Argentina’s 21/22 exports at 6.5 MMTs, compared to USDA’s official estimate of 6.35 MMT. FAS also slightly lifted its estimate for 20/21 soybean exports 200,000 metric tons to 5.2 MMT, which matches the official USDA estimate. FAS estimates for crush in both marketing years remain below USDA official, with 21/22 crush estimated at 42.5 MMTs, -500,000 metric tons lower than USDA. Crush for 20/21 is estimated -1.8 MMTs lower than USDA at 40.5 MMTs. FAS also forecasts considerably higher soybean ending stocks than the USDA currently. FAS has 21/22 stocks pegged at 11.8 MMT versus USDA at 8.3 MMT, while FAS estimates 20/21 stocks at 12.2 MMTs versus 8.22 MMTs official USDA.

FAS says higher stocks are partially a reflection of a general expectation of a more aggressive currency devaluation following mid-term congressional elections scheduled for November 2021. Because capital controls prevent farmers from converting pesos to U.S. dollars, and because of inflation that is currently running more than +50% on an annual basis, many farmers prefer to retain a portion of their harvested soybeans in storage rather than taking advantage of current high prices, selling and losing the value of the proceeds of the sale to inflation or devaluation. (Sources: USDA FAS, Dialogo Chino, Reuters)

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